News | September 11, 2014

Tax Savings Not Only Benefit to Medtronic-Covidien Deal

September 11, 2014 — U.S.-based Medtronic said it would purchase Ireland-based Covidien for $42.9 billion, combining two of the world's biggest medical device makers and helping Medtronic savings with a headquarters change. Kalorama estimates the deal will come just short of creating the largest device company based on 2013 revenues in its Global Market for Medical Devices, 5th Edition report, released last year. According to Kalorama, Johnson & Johnson is the largest device company at $28.5 in 2013, but if the new combined company has a strong year of sales, rankings could change.

The deal, which is being structured as a so-called inversion, will relocate Medtronic from its legal headquarters in Minneapolis to Covidien's corporate home in Ireland, where the tax rate is significantly lower than in the United States. Medtronic plans to keep significant operations in the United States. But Kalorama says the tax implications are only one aspect. A greater aspect is access to Covidien's rich distribution channels in U.S. and European hospitals.

"They are probably complementary in terms of distribution venues, and can stay out of each other's revenue lines well," said Bruce Carlson, publisher of Kalorama Information. "Covidien staples your wound, keeps track of you in the hospital while Medtronic makes your heart pump, provides a new spine, or provides your body with timed insulin. Medtronic management is not emphasizing tax savings in the press statements."

According to Kalorama's report, consolidation was a trend in the device industry. In 2013 and early 2014, key market players were active in acquiring companies, among these were Boston Scientific, Stryker Corp., CareFusion, ThermoFisher Scientfic, The Carlyle Group and Medtronic. Stryker's purchase of MAKO Surgical, Zimmer's purchase of Biomet and the sale of J&J's Ortho Clinical Diagnostic Group to the Carlyle Group were among the larger purchases.  

"The media reports are focusing on the inversion deal, but with a slow-growing device market, consolidation has been an industry trend," Carlson said. "This wouldn't be announced if there weren't real benefits to the business as well as the tax moves."

Kalorama said that together, the two companies will become one of the largest medical device makers, with 87,000 employees in more than 150 countries. Medtronic will pay $35.19 in cash and 0.956 of a share for each Covidien share. 

Kalorama's complete report on Global Market for Medical Devices, 5th Edition has a complete breakdown of 2013 and early 2014 device acquisitions.

For more information: www.kaloramainformation.com/redirect.asp?progid=86522&productid=8186981

Related Content

Nuance Launches Cloud-Based mPower Clinical Analytics Platform at AHRA 2018
Technology | Analytics Software | August 16, 2018
At the Association for Medical Imaging Management (AHRA) 2018 Annual Meeting and Exposition, July 22-25 in Orlando, Fla...
CMS Proposes Overhaul of Medicare's Accountable Care Organization Program
News | Radiology Business | August 09, 2018
The Centers for Medicare & Medicaid Services (CMS) issued a proposed rule August 9 that would overhaul the Medicare...
Videos | Radiology Business | August 03, 2018
Sheila Sferrella, president of Regents Health Resources and Bill Finerfrock, president of Capitol Associates, discuss
Videos | Clinical Decision Support | August 03, 2018
Sheila Sferrella, president of Regents Health Resources and Bill Finerfrock, president of Capitol Associates, discuss
Videos | Digital Radiography (DR) | August 03, 2018
Sheila Sferrella, president of Regents Health Resources and Bill Finerfrock, president of Capitol Associates, discuss
David Westgate Named Chairman, President and CEO of Carestream Health
News | Radiology Business | August 03, 2018
David C. Westgate was recently named the new chairman, president and CEO of Carestream Health.
Videos | Radiology Business | August 02, 2018
Angelic Bush, CRA, FAHRA, president of the Association for Medical Imaging Management (AHRA), and Bill Algee, AHRA pr
ECRI Institute Announces New Clinical Guideline Repository Website
News | Radiology Business | July 27, 2018
July 27, 2018 — Following the deactivation of the National Guideline Clearinghouse (NGC) by the Agency for Healthcare
FlexForce Coach performance consulting and FlexForce Tech staffing solutions, which are designed to educate and improve the workflow of radiologic and laboratory technologists
News | Radiology Business | July 20, 2018
Siemens Healthineers debuted the FlexForce Coach performance consulting and FlexForce Tech staffing solutions, which
2019 Proposed Physician Fee Schedule Appropriate Use Criteria Summary
Feature | Clinical Decision Support | July 13, 2018 | Nathan Baugh
On July 12, the Centers for Medicare and Medicaid Services (CMS) released the proposed rule for the 2019 Physician Fe
Overlay Init