Tax inversion deal continues consolidation theme among medical device makers
US medical technology firm Medtronic is to buy Irish-registered company Covidien for $43 billion (£25 billion). The deal continues a theme of consolidation within the medical devices sector, with firms looking to broaden their product and service portfolios and bring to bear efficient, globalised supply chains and sales forces.
Medtronic has also struck a deal with pharma major Sanofi to collaborate on treatment systems for type 2 diabetes, combining Sanofi’s expertise in insulin products with Medtronic’s capabilities in glucose monitoring and insulin delivery.
The deal follows several other acquisitions in recent months, most notably musculoskeletal implant giant Zimmer agreeing to buy rival Biomet for $13 billion in April this year.
Another advantage for Medtronic, one that mirrors Pfizer’s attempted takeover of AstraZeneca, will be an ‘inversion’ in its registered tax base. Covidien moved its executive offices from the US to Ireland in 2009, before the US tightened rules on companies moving abroad to reduce corporation tax rates. But the size of this deal means sufficient shares in the new company will be held abroad to allow the merged firm to claim Ireland as its tax base. This will allow the company to avoid heavy taxes on repatriating cash assets held outside the US.