Medtronic Reaffirms Covidien Acquisition, Reports Positive Quarterly Results
Medtronic Inc. reaffirmed its intent to acquire Irish-based Covidien in its second quarter results for fiscal year 2015, a quarter that may be its last as an American company.
The Fridley-based medical device manufacturer reported growth for the quarter ending Oct. 24 and said its $43 billion purchase of Covidien, who also produces medical devices, was part of its long-term strategy for growth.
“We remain focused on reliably delivering on our baseline financial goals by continuing to execute on our three primary strategies— therapy innovation, globalization and economic value,” Medtronic CEO Omar Ishrak said in a statement. “The Medtronic and Covidien combination provides an even greater opportunity for us to truly address the universal needs of healthcare.”
Revenue for the second quarter was up a reported 4 percent to $4.366 billion, compared to $4.194 billion during the same period in fiscal 2014. Nearly all major product groups saw growth.
In part due to the positive quarter, the company said it was now expecting revenue growth of 4 to 5 percent, which is at the upper end of the company’s previously stated range of 3 to 5 percent. Earnings per share are expected in the range of $4.00 to $4.10.
Medtronic’s purchase of Covidien is controversial, as it will involve Medtronic moving its tax domicile to Dublin, where Covidien is currently headquartered. This is done through a process called “inversion,” where a company buys another, then uses that purchase to reincorporate in a typically lower-tax location. While Medtronic will officially be an Irish company, it said it intends to maintain its “operational headquarters” in Fridley.
The Pioneer Press reported that many long-term shareholders of Medtronic would take a tax hit as capital gains are levied against them when their shares in the company are exchanged for shares in the new company.
The two companies’ shareholders will vote on the acquisition on Jan. 6. Should it go through, the company will lose its status as a Fortune 500 company.