Top Mergers and Acquisitions: Medtronic (MDT) and Covidien (COV)
Among all the M&A in the healthcare industry in Q2, none was larger than the $42.9 billion in cash and stock Medtronic (MDT) splashed on Ireland’s Covidien (COV) — but this was no mere merger of medical device makers.
True, by adding Covidien’s portfolio of hospital supplies to its armory, Medtronic is better able to compete with top dog Johnson & Johnson (JNJ) in the medical device business. But in reality, this was all about taxes.
For tax law purposes, the combined company will be based in Ireland. Since U.S. companies don’t like bringing profits earned overseas back home because of the tax hit, the deal should free up cash. Don’t be surprised if Medtronic stock buybacks and dividend hikes soon follow.