Medtronic, Inc. MDT -0.15% , a global leader in medical technology, services and solutions have agreed to buy Covidien. Covidien is a multinational which relocated its headquarters to Dublin’s Hatch Street in 2009, employs 1,700 people in Galway, Tullamore, Athlone and Dublin and is the largest private industrial employer in the Midlands.
The world’s largest stand-alone medical device maker, has made the deal with the a maker of devices used in surgery, for $42.9 billion. It has agreed to shift its executive base to Ireland in the latest transaction aiming for lower corporate tax rates abroad.
Medtronic will pay the equivalent of $93.22 for each share of Dublin-based Covidien, or about 29 percent more than Covidien’s New York closing price of $72.02 on June 13, the companies said yesterday in a statement.
The merged company is named as Medtronic Plc and will enable Medtronic to compete with Johnson & Johnson (JNJ), the largest medical device company.
The primary motivation is “strategic and operational alignment,” said Medtronic Chief Executive Officer Omar Ishrak in a telephone interview yesterday. “It will drive better value for patients and customers around the world.”
Minnesota Governor Mark Dayton reported that he has a chat with Ishrak, and was told Medtronic aims to create over 1,000 new medical technology-related jobs in the state in the next five years.
“We were assured that the company intends to keep its operational headquarters here in Minnesota and that no jobs will be lost here due to this transaction,” Dayton said in a statement. “That is tremendous news for Minnesota and evidences the company’s continued commitment to our state.”
After the unanimous approval by the boards of both companies, the shareholder approval.
“Covidien and Medtronic, when combined, will provide patients, physicians and hospitals with a compelling portfolio of offerings that will help improve care and surgical performance,” said Jose E. Almeida, Chairman, President and Chief Executive Officer of Covidien. “This transaction provides our shareholders with immediate value and the opportunity to participate in the significant upside potential of the combined organization. I’d like to thank our 38,000 employees whose hard work and dedication has enabled Covidien to deliver innovative health solutions that improve patient outcomes.”
Covidien, with a market capitalization of $32 billion based on its June 13 closing stock price, generated $10.2 billion in fiscal year 2013, roughly the same as five years earlier. Medtronic, with a market value of $61 billion and revenue of $17 billion, has been growing in the low single digits.
Medtronic received financial advice from Perella Weinberg Partners LP and legal advice from Cleary Gottlieb Steen & Hamilton LLP. Covidien’s financial adviser was Goldman, Sachs & Co. and it’s legal advisers were Wachtell, Lipton, Rosen & Katz and Arthur Cox. Bank of America Merrill Lynch provided financing.