Medtronic Inc.’s share price, to acquire Covidien Plc in a 42.9-billion-dollar deal

The second-biggest medical device and equipment manufacturer – Medtronic Inc. made a statement yesterday, revealing that it agreed to acquire Covidien Plc in a cash-and-stock deal estimated at about 42.9 billion. The deal will allow Medtronic to make use of lower tax base, avoiding higher US corporate taxes.

According to a joint statement made by the two companies, the price of the purchase amounts to the equivalent of 93.22 dollars per each share of Covidien Plc. After the deal is finalized, the new entity will be called Medtronic Plc and will be located in Ireland because of tax purposes. The Chairman and Chief Executive Officer of U.S.-based Medtronic, Mr. Omar Ishrak explained that the transition would consolidate the positions of the entity in the sphere of neurovascular technologies.

As reported by the Financial Times, the CEO of Medtronic, Mr. Ishrak said: “This transaction is strategic first; the financial structure and optimisation of tax discussion came after. The tax rates for Medtronic do not change a significant amount, but the structure gives us access to the cash generated by Covidien assets abroad which we can then reinvest into US technologies.”

Currently, the market capitalisation of Medtronic Inc. amounts to 60.75 billion dollars. The acquisition is considered the largest one for the company so far and is considered beneficial for it, because the U.S. company will have access to the extensive hospital supplies portfolio of Covidien. In addition, the latter would make improve its position against one of its most serious rivals Johnson & Johnson in the highly-competitive global pharmaceuticals industry. The annual combined sales of the companies after the merger are expected to amount to 27 billion dollars.

The talks of the acquisition have been in motion since early April. Now the news of the merger comes at a moment when there is a great activity in the healthcare industry, where there is a wave of mergers and acquisitions since the beginning of the year.

Medtronic Inc. was 0.15% down to close at 60.70 dollars per share yesterday, marking a one-year change of +15.01%. According to the information published on CNN Money, the 16 analysts offering 12-month price forecasts for Medtronic Inc have a median target of 66.00, with a high estimate of 70.00 and a low estimate of 57.00. The median estimate represents a +8.73% increase from the last price of 60.70.