By Michelle Fay Cortez
After pulling off the largest ever “inversion” deal structured to reduce U.S. income taxes, Medtronic Pic (MDT) is plotting another audacious move: the transformation of health-care delivery.
The $42 billion purchase of Covidien Plc (COV) will close as soon as Monday. The transaction cuts taxes by moving Medtronic’s titular headquarters to Ireland. The deal also gives the medical-device maker a wider array of products, enabling the company to work more comprehensively with hospitals to control costs and make care more accessible, Chief Integration Officer Geoff Martha said.
Medtronic went through with the deal despite resistance from the U.S. government. The Treasury Department proposed changes last year to make transactions less profitable for U.S. companies that shift their legal addresses overseas to avoid paying taxes on foreign earnings. Medtronic, which will be run from Minneapolis and domiciled in Ireland for tax purposes, borrowed $16 billion to finance the deal after the rule change meant it couldn’t use cash held abroad without paying taxes.
While the Treasury changes derailed several acquisitions, including AbbVie Inc. (ABBV)’s proposed merger with Shire Plc (SHP), the financial benefits weren’t the driving force for Medtronic, Martha said in an interview.
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