THE world's second-largest maker of medical devices is moving its headquarters to Ireland for tax purposes.
Medtronic will come here after agreeing to buy Dublin-based Covidien for $42.9bn (€31bn) in cash and stock but the move will make little practical difference.
Medtronic's executive team will not have to move to Ireland to consummate the deal. While Covidien is currently based in Dublin for tax purposes, the company is run from its offices in Mansfield, Massachusetts.
The gives the Minneapolis-based Medtronic access to Covidien's portfolio of hospital supplies, from surgical staplers to ventilators, and adds size and scope that may allow it to better compete with Johnson & Johnson, the largest medical device company. At the same time, use of Covidien's Irish address could free almost $14bn in cash Medtronic now holds overseas as a way to avoid being taxed on it under US laws.
The primary motivation is "strategic and operational alignment," said Medtronic chief executive Omar Ishrak. "It will drive better value for patients and customers around the world."
Covidien shares jumped 30pc yesterday morning in Frankfurt. Medtronic climbed 2.5pc.
Medtronic's tax rate will remain about the same, even after the company redomiciles in Dublin, Mr Ishrak said. The advantage gained in the deal is that Medtronic will be able to better use profits it made outside of the US, which it plans to invest back into the industry, according to Ishrak.
"This is important to stimulate the medical-technology industry in the US," Mr Ishrak said. "We have made a commitment we will deploy at least $10bn over the next decade."
Minnesota governor Mark Dayton said he spoke with Mr Ishrak and was told Medtronic intends to create over 1,000 new medical technology-related jobs in the US state in the next five years.
"We were assured that the company intends to keep its operational headquarters here in Minnesota and that no jobs will be lost here due to this transaction," Mr Dayton said in a statement.
The combined companies will be able to shave at least $850m (€627m) from its annual costs by 2018 by integrating their back-office operations, manufacturing and supply chains, according to the companies' statement. (Bloomberg)