US giant medical device manufacturer Medtronic is set to buy the Irish Covidien in a cash and shares deal worth $42.9 billion.
This deal lets Medtronic reap the benefits of a certain tax inversion law as the company moves its headquarters to Ireland, which is a European country that enjoys lower taxes. The average corporate tax rate in the European country is 12.5 percent. This is a big advantage for the big medical device company, since the business tax rate in the US could reach up to a whopping 35 percent, which is one of the biggest in the world.
Some of Medtronic’s major products include surgical tools and heart stents.
After the acquisition of Covidien, the two companies will merge into one business under the name Medtronic plc.
In a statement, Medtronic said it will position its executive office in the European country where both of the companies have a strong presence for quite a long time. Covidien has its current major headquarters located in Ireland.
Medtronic employees in Minneapolis need not worry, because the company will still have its headquarters for operations in that area, where 8,000 people work.
The current chief executive and chairman of Medtronic Omar Ishak will lead the combined Medtronic pls. This combined medical company will now have over 87,000 workers coming from 150 countries all over the world.
The US firm expects to save up to $850 million by the end of the 2018 financial year of Medtronic. This savings is from maximizing the combined international manufacturing, back-office, and supply chain operations of the company.
Before the acquisition will push through, it should first be approved by the shareholders of the two companies. It also requires regulatory clearances from China, the European Union and the United States of America.
Medtronic and Covidien expect the acquisition to be completed by the start of 2015.