Summary:
On Jan 26, Medtronic, Inc. completed the long-waited acquisition of Covidien and formed an Ireland-based new holding company, Medtronic plc. Shortly after the completion, the Medtronic also released solid fiscal third quarter results with both the top and the bottom line steering ahead of the respective Zacks Consensus Estimate. The Covidien acquisition is expected to meaningfully accelerate all three fundamental growth strategies of the company. Besides, Medtronic's ongoing successful effort to boost High power revenues amid flat global market wide performance was encouraging. Yet, the corporate tax-reform has adversely impacted Medtronic's corporate inversion motto. Looming headwinds such as currency pressure, soft economy and tough competition, meanwhile, keep us on the sidelines. Currently, we are Neutral on the stock.
Overview:
On Jan 26, 2015, Medtronic, Inc. (the legacy NYSE-listed parent company, incorporated in Minnesota) acquired Ireland-based Covidien plc. The acquisition resulted in the formation of a new holding company incorporated in Ireland Medtronic plc (the new Irish tax resident, NYSE-listed parent company holding both Medtronic, Inc. and Covidien).
The cash-and-stock transaction of this agreement is valued at approximately $49.9 billion, based on Medtronic's closing stock price of $75.59 per share on Jan 26, 2015. Under the terms of the transaction, each ordinary outstanding shareholder of Covidien as of the closing date will receive $35.19 in cash and 0.956 of an ordinary share of Medtronic plc.
Moreover, as per the agreement, each common stock outstanding shareholder of Medtronic, Inc. as of the closing date will receive one ordinary share of Medtronic plc.
Per the terms of this agreement, Medtronic, Inc. and Covidien plc have now become wholly-owned subsidiaries of the new combined holding company Medtronic plc, with its principal executive offices based in Ireland. However, the combined company's operational headquarters will remain in Minnesota.
According to Medtronic, the combined business will be divided into four major groups. Mike Coyle will run the Cardiac and Vascular Group (CVG) while Hooman Hakami will lead the Diabetes Group. Chris O' Connell will be the executive vice president and president of the Restorative Therapies Group (RTG). Bryan Hanson, the current group president of Covidien, will lead the newly formed Covidien Group the fourth major business segment at the combined company.
Further, the former Peripheral Vascular business of Covidien that comprised Endovascular, Arterial and CVI businesses, will be combined with CVG's Aortic and Peripheral Vascular business. Covidien's Neurovascular business will be integrated into RTG as an independent business unit. The combined entity will operate in four major regions, namely, Asia Pacific, the Americas, Europe, the Middle East and Africa, and China. The company will provide more information on organizational restructuring later.