Medtronic, Inc. expands medical services to treat more patients with Covidien Plc acquisition.
Medtronic, Inc. is a global leader in medical technology, medical services and solutions for various medical concerns. Today, the company announced its intention to use approximately $16 billion in external financing to acquire Covidien plc. Medtronic plans to fund its acquisition by using cash from its foreign subsidiaries which was previously planned. There will be no changes in the terms and conditions of the definitive agreement reached between the two companies that were created in June this year.
To fund the cash portion of the transaction, Medtronic intends to use new financing strategies that will be in place by closing of the transaction. Upon completion of the transaction, each outstanding ordinary share of Covidien will be converted into the right to receive $35.19 in cash and 0.956 of an ordinary share of Medtronic plc, the parent company of the new combined entity. This agreement was already in place when the two companies signed a definitive agreement in June of this year.
Omar Ishrak, Chairman and CEO of Medtronic mentioned in an exclusive interview “This proposed acquisition was conceived and undertaken for strategic reasons and is intended to create a company that can treat more patients, in more ways and in more places around the world.” Mr. Ishrak continued “We believe our combination will be uniquely positioned to help advance the goals of the Affordable Care Act in the U.S. as well as the objectives of virtually all health systems – to drive access to high-quality, affordable health care for patients around the world. Since the announcement of this transaction, we have worked closely with our Covidien colleagues to plan for the integration of these two leading companies, and we look forward to closing the transaction and realizing these strategic benefits.”
The new financing will incur new expenses for Medtronic however the benefits of the transaction remain compelling. The transaction is still expected to be accretive to Medtronic`s cash earnings in FY2016, the first full fiscal year, and significantly accretive thereafter. The acquisition is also expected to be neutral to GAAP earnings by FY2019 and accretive thereafter. The announcement of this acquisition today has no effect on the revenue outlook and earnings per share guidance. Medtronic expects the transaction to close in late 2014 or early 2015.
As stated in the June 15 transaction agreement, a new Irish holding company – Medtronic plc – will become the parent company of the new combined entity and will be included on the NYSE. The company will maintain principal executive offices in Ireland and will continue to have operational headquarters in Minnesota.
About Medtronic, Inc.
Medtronic, Inc. has headquarters in suburban Minneapolis. It is the world’s fourth largest medical device company and is included in the Fortune 500. Medtronic operates in more than 140 countries. The company employs 49,000 people, including 5,800 scientists and engineers, pursuing research and innovation that has led to more than 28,000 patents. There are six main business units of Medtronic which develop and manufacture devices and therapies to treat more than 30 chronic diseases, including heart failure, Parkinson’s disease, urinary incontinence, Down’s syndrome, obesity, chronic pain, spinal disorders, and diabetes
The company remains focused on the mission originally written by co-founder Earl Bakken in the early-1960s. The first sentence of the six-paragraph mission statement reads: “To contribute to human welfare by application of biomedical engineering in the research, design, manufacture, and sale of instruments or appliances that alleviate pain, restore health, and extend life.” Medtronic, Inc. stock market evolution:
About Omar Ishrak
Mr. Omar S. Ishrak has been the Chief Executive Officer and Chairman of Medtronic, Inc. since June 13, 2011. He is a Member of the Blood Center of Wisconsin. He is also on the Health Leadership Council of the Save the Children Foundation. Mr. Ishrak earned a Bachelor of Science and a PhD in Electrical Engineering from the University of London, King’s College.
Covidien Public Limited Company is an Irish-headquartered global healthcare products company. It manufactures medical devices and supplies. The company became an independent publicly traded company after being spun off from Tyco International in 2007. In 2011, Jose E. Almeida became the President and CEO of Covidien. In 2011, Covidien had more than 41,000 employees in 59 countries and its products are sold in more than 140 countries worldwide
In 2012, Covidien acquired three medical device companies in Israel: superDimension, a pulmonary endoscope developer was acquired for $350 million, Oridion Systems Ltd., capnography respiratory monitors and modules manufacturer was acquired for $346 million and PolyTouch, a developer of hernia mesh placement technologies was acquired for $30-40 million. In June 2014, Medtronic agreed to buy Covidien for $42.9 billion. Covidien stock market evolution: