MEDICAL-TECHNOLOGY COMPANY MEDTRONIC has been given the all-clear to buy out Ireland-based rival Covidien in a deal which will allow the US firm to slash its tax bill.
US competition regulators have approved Medtronic’s plan to buy the Dublin-headquartered company in an agreement worth $42.9 billion (€34.3 billion) in cash and shares.
The so-called “inversion” deal includes Medtronic shifting its executive team to Ireland and setting up a new tax base here while keeping its operational headquarters in Minneapolis.
The Federal Trade Commission yesterday said the buyout could go ahead as long as Covidien offloaded one of its product lines.
While Medtronic bosses have denied planning the move to take advantage of Ireland’s sympathetic tax regulations, the relocation is expected to deliver big savings for the combined company.
It would have access to revenues from sales outside the US, worth an estimated €13 billion each year, without having to pay taxes in that country on the earnings.
The US corporate tax rate currently stands at 35%, compared to Ireland’s much-publicised 12.5% company tax rate.
Bringing it all together
Medtronic chief executive Omar Ishrak said the approval was an important milestone in bringing the two companies together.
“We continue to make good progress in planning for the integration of these two companies which will unite them under a single mission – to alleviate pain, restore health and extend life for patients with chronic disease around the world,” he said.
When the transaction is complete, the combined company will allow Medtronic to reach more patients, in more ways and in more places.”
Covidien, which makes products from life-support monitors to surgical instruments, employs about 1,500 staff in Ireland and has plants in Galway, Tullamore and Athlone.
Medtronic also has significant operations in Ireland, including a major facility of its own in Galway.
The deal still has to get final approval from shareholders and the High Court before it can go ahead.
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