U.S.-based medical device manufacturer Medtronic announced this week it intends to acquire peer company Covidien and relocate operations to Ireland, where it can avail of tax incentives.
The cash and stock deal is for $42.9 billion and is Medtronics’ biggest yet, with Covidien valued at around $93.22 per share at around the time of the deal’s announcement. The newly merged company will be heating up the competition between it and chief rival Johnson & Johnson.
The move is a case of bad timing for Medtronic however. While it is not uncommon for major U.S. companies to set up offices and operations in Ireland to take advantage of the country’s attractive corporate tax rates, these practices have come under scrutiny of late.
The EU is currently investigating the tax practices of companies like Apple, who are in Ireland, while U.S. authorities have been critical of companies relocating to Ireland and other European countries.
“After the completion of the transaction, the businesses of Medtronic and Covidien will be combined under a new entity to be called Medtronic plc,” said Medtronic upon the announcement.
“It will have its principal executive offices in Ireland, where Covidien’s current headquarters resides and where both companies have a longstanding presence.”
Nevertheless, Medtronic, which is worth $60 billion itself, remains optimistic for its new future, despite the Irish Independent describing the deal as putting Ireland under the spotlight once again over taxes.
“This acquisition will allow Medtronic to reach more patients, in more ways and in more places. Our expertise and portfolio of services will allow us to serve our customers more efficiently and better address the demands of the current healthcare marketplace,” said Omar Ishrak, chairman and CEO of Medtronic. “We also look forward to welcoming the Covidien team to Medtronic and working together to improve healthcare outcomes globally.”
At the time of writing, Medtronic and Covidien employ 87,000 and 31,000 people worldwide, respectively. It remains unclear how the merger will affect employees.
Edited by
Maurice Nagle
