Medtronic and Covidien to close $43B merger today with Irish High Court approval

Medtronic's Fridley, MN, global headquarters--Courtesy of Bobak Ha'Eri, CC-BY-SA 3.0

Weeks after Medtronic ($MDT) and Covidien ($COV) won shareholder approval for their $43 billion merger, the companies expect to finalize the deal today after the Irish High Court signed off on the pending acquisition.

The merger will create a business with an estimated $27 billion in revenue and a combined 85,000 employees. Medtronic will shift its legal domicile to Ireland, but the combined company will keep its executive offices in a Minneapolis, MN, suburb, The Minneapolis StarTribune reports. Dublin-based Covidien, whose operating headquarters are in Boston, may transfer some of its Boston jobs to the Minnesota region after the deal closes, increasing the number of positions there by at least 1,000. The combined company will comprise four major business groups and four geographic regions led by a new executive committee, with current chairman and CEO Omar Ishrak at the helm.

Medtronic and Covidien have long emphasized a $10 billion investment in U.S. businesses as a result of the merger. But cuts could be on the horizon as the companies look to achieve synergies, according to the StarTribune story. Medtronic execs estimate that they can weed out redundancies and pare down office expenses to save $850 million a year in the next three years.

Minneapolis, MN-based Medtronic is also eyeing certain tax benefits after the deal goes through. The company will be able to spend about 60% of its cash flow without facing U.S. taxes on the money after the merger, compared to 30% of its cash flow today.

But it has not been all smooth sailing for Medtronic and Covidien in their pending merger. The companies have faced their fair share of pushback over the deal, drawing the ire of lawmakers and investors unhappy with the acquisition's tax inversion elements. Medtronic shareholders railed against the merger and filed lawsuits to block a shareholder vote, claiming that the acquisition would expose longtime Medtronic owners to hefty capital-gains taxes. But a Minnesota district court judge ruled against plaintiffs earlier this month and allowed voting on the proposed deal. Medtronic and Covidien recently settled a consolidated class action suit with shareholders over the deal, agreeing to disclose additional details about the merger to appease plaintiffs.

Meanwhile, the companies continue to ease the deal past European and U.S. regulators. In November, the U.S. Federal Trade Commission and EU regulators OK'd the merger after Covidien agreed to sell its clinical-stage Stellarex drug-coated angioplasty balloon to Spectranetics ($SPNC) for $30 million. In December, Medtronic sold $17 billion in bonds to fund its acquisition of Covidien, financing the deal with debt instead of foreign cash to avoid potential skirmishes with regulatory authorities.

- read Medtronic's statement
- here's the Star Tribune story

Special Report: Med tech M&A gets much, much bigger during the first half - Medtronic muscles in on Covidien

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