Medtronic, Inc. (NYSE:MDT), one of the world’s leading medical technology services and solutions providers, signed a definitive agreement to acquire Covidien plc (NYSE:COV), a global healthcare technology and medical supplies provider, for $93.22 per share or $42.9 billion in cash and stock.
Details of Medtronic – Covidien deal
Each of Covidien plc (NYSE:COV)’s outstanding common shares will be converted into the right to receive $35.19 in cash and 0.0956 of a common share of Medtronic, Inc. (NYSE:MDT) following the completion of the deal. The proposed per-share acquisition price of $93.22 represents a 29% premium to the closing price of Covidien’s stock on June 13. According to Medtronic, the transaction is expected to be accretive to its cash earnings in FY2016 and significantly accretive in the following years. It is expected to be accretive to GAAP earnings by FY2018.
The merger is expected to result in approximately $800 million in annual pre-tax cost synergies, including the optimization of the combined company’s global back office, manufacturing and supply chain infrastructure, and more by the end of 2018.
Executive comments
According to Omar Ishrak, chairman and CEO of Medtronic, Inc (NYSE:MDT), the deal will further advance the company’s mission to alleviate pain, restore health and extend life for patients worldwide. In a statement, Ishrak said, “This acquisition will allow Medtronic to reach more patients, in more ways and in more places.” He added that their expertise and portfolio of services will allow them to serve customers more efficiently and meet the demands of the current healthcare marketplace.
Jose Almeida, chairman, president and CEO of Covidien plc (NYSE:COV), said the combined company will provide patients, physicians and hospitals with a compelling portfolio of offerings that will help improve care and surgical performance. “This transaction provides our shareholders with immediate value and the opportunity to participate in the significant upside potential of the combined organization,” said Almeida in a statement.
Merger rationale
Medtronic, Inc. (NYSE:MDT) said a merger with Covidien plc (NYSE:COV) will accelerate and support its three fundamental strategies, which are therapy innovation, globalization and economic value. In terms of therapy innovation, the medical technology services and solutions provider emphasized that it will become a dominant leader in delivering therapy and procedural innovations to address major diseases affecting patients and healthcare costs worldwide with its expanded portfolio of innovative products and services.
Medtronic, Inc. (NYSE:MDT) emphasized that Covidien plc (NYSE:COV) has an impressive portfolio of industry-leading products that will boost its existing portfolio and offer greater breadth across clinical areas and entry points in new therapies. In terms of globalization, the combined company will have a presence in more than 150 countries and generate revenues of $13 billion outside the United States, including $3.7 billion from emerging markets.
According to Medtronic, Inc (NYSE:MDT), the merger will also enable the company to provide a broader array of complementary therapies and solutions to drive more value and efficiency in healthcare systems. Given the deep relationship of both companies with the stakeholders of healthcare systems, they believe the merger will provide great ability to identify and create further value-based solutions.
Combined company’s commitment
Medtronic, Inc. (NYSE:MDT) said the combined company is committed to the United States as a healthcare innovator, strategic business partner and employer of choice. Metronic will allocate $10 billion in technology investments in the areas of early state venture capital investments, acquisitions and R&D in the U.S. over the next ten years.
