Medical device maker Medtronic recently announced that it will acquire the Irish medical technology firm Covidien for $42.9 billion in cash and stock.
Standard & Poor ‘s says this is the largest acquisition of a foreign firm by a U.S. company, Qmed.com reports. Medtronic is the fourth largest medical device maker and Covidien is ranked eighth. The merged firm will have 87,000 employees based in more than 150 countries. Covidien has about 38,000 employees internationally, 1800 of whom are based in Massachusetts.
Company executives have indicated that cost cutting could follow the merger, with approximately $850 million in savings planned over the next two to three years. Medtronic’s chief financial officer, Gary Ellis, told analysts that initial cost savings will come from combining administrative and back-office operations and later savings will result from consolidating manufacturing plants and information technology systems, the Boston Globe reports.
Though Medtronic CEO Omar Ishrak, who will head the combined company, denies that the deal was designed to lower Medtronic’s tax burden, under the deal, Medtronic will be able to shift its headquarters to Ireland, where Covidien is officially incorporated. Ireland taxes companies at much lower rates than does the United States, according to the Globe.
The deal leaves about $10 billion for Medtronic to invest in research and development in the United States over the next decade. The merger is expected to pass regulatory requirements by the end of the year or by the early 2015, according to Qmed.
