Medtronic €31bn deal will see it move HQ to Ireland

US medical device maker Medtronic Inc has said it agreed to buy Dublin-based Covidien Plc for $42.9bn (€31.6bn) and shift its executive headquarters to Ireland in the latest move by US firms to harvest lower corporate tax rates abroad.

While the cash and stock deal will allow Medtronic to reduce its overall global tax burden, the Minneapolis-based company said it was driven by a complementary strategy with Covidien on medical technology, rather than tax considerations.

“The real purpose of this, in the end, is strategic, both in the intermediate term and the long term,” Medtronic chief executive Omar Ishrak said after the deal was announced. “It is good for the US in that we will make more investment in US technologies, which previously we could not.”

Medtronic’s corporate tax rate, now at around 18%, won’t change much, Ishrak said.

The merger of Medtronic, the world’s largest stand-alone medical device maker with a market value of over $60bn, and Covidien, a maker of devices used in a range of surgical procedures, will create a close competitor in size to the medical device business of industry leader Johnson & Johnson Co.

It broadens Medtronic’s scope into areas such as weight-loss surgery and laparoscopic procedures.

Acquisitions of companies aimed at lowering corporate tax rates, known as inversions, have historically been rare but are becoming more common.

Some US lawmakers are concerned that the deals erode government revenue by giving corporations another tax-avoiding loophole.

Democrats in Congress have called for new restrictions on these deals, with bills offered by Senator Carl Levin and his brother, Representative Sander Levin. President Barack Obama has a proposal similar to the Levins’ bills.

— Reuters