Medtronic to buy Covidien

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US medical device manufacturer Medtronic has agreed to buy Ireland-based competitor Covidien for $US42.9 billion ($A46.42 billion) in cash and stock.

THE combined company will have its executive offices in Dublin, where it could benefit from Ireland’s lower corporate tax rates. But the merged company would continue to operate in Minneapolis, where Medtronic employs more than 8,000, the companies said in a statement.

Medtronic is paying a 29 per cent premium on Covidien’s stock price as of Friday. The deal is the latest in a series of acquisitions by medical-device manufacturers. The companies are seeking to expand their offerings and contain costs in response to price curbs forced by the nation’s new health care law. In April, Zimmer Holdings, an orthopedic device maker, announced that it was buying Biomet in a $US13 billion deal. Medtronic makes pacemakers and insulin pumps, among other products. Covidien specialises in surgical equipment. As a result of savings from the deal, Medtronic said it would spend an additional $US10 billion over the next decade in investments, acquisitions and research and development in the United States. “The medical technology industry is critical to the US economy, and we will continue to invest and innovate and create well-paying jobs,” Omar Ishrak, Medtronic’s CEO, said in a statement. Efforts by domestic companies to use mergers to reincorporate overseas for tax reasons have raised concern among some US lawmakers. Ireland taxes corporate income at 12.5 per cent, compared with a top marginal rate of 39.6 per cent in the United States, according to the tax advisory firm KPMG. Drug-maker Pfizer recently tried unsuccessfully to acquire UK-based Astra-Zeneca. The banana-seller Chiquita agreed to buy an Irish firm, Fyffes, in March.