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Medtronic, Inc.
MDT, a global leader in
medical technology, services and solutions, today announced that it intends to
use approximately $16 billion in external financing to complete the
acquisition of Covidien plc
COV, rather than using cash from its
foreign subsidiaries as previously planned. All terms and conditions of the
definitive agreement reached between the two companies in June remain
unchanged.
To fund the cash portion of the transaction, Medtronic now intends to utilize
new financing expected to be in place by closing of the transaction. As
announced in June, upon completion of the transaction, each outstanding
ordinary share of Covidien will be converted into the right to receive $35.19
in cash and 0.956 of an ordinary share of Medtronic plc, the parent company of
the new combined entity.
"This proposed acquisition was conceived and undertaken for strategic reasons
and is intended to create a company that can treat more patients, in more ways
and in more places around the world," said Omar Ishrak, Chairman and CEO of
Medtronic. "We believe our combination will be uniquely positioned to help
advance the goals of the Affordable Care Act in the U.S. as well as the
objectives of virtually all health systems - to drive access to high-quality,
affordable health care for patients around the world. Since the announcement
of this transaction, we have worked closely with our Covidien colleagues to
plan for the integration of these two leading companies, and we look forward
to closing the transaction and realizing these strategic benefits."Â
Despite the additional expense of the new financing, the strategic benefits of
the transaction remain compelling. The transaction is still expected to be
accretive to Medtronic's cash earnings in FY2016, the first full fiscal year,
and significantly accretive thereafter. The transaction is also expected to be
neutral to GAAP earnings by FY2019 and accretive thereafter. [1] Today's
announcement does not affect Medtronic's FY2015 revenue outlook and earnings
per share guidance, as the company's outlook and guidance does not contemplate
the expected closing of the Covidien transaction. Medtronic expects the
transaction to close in late CY2014 or early CY2015.
As provided in the June 15 transaction agreement, a new Irish holding company
- Medtronic plc - will serve as the parent company of the new combined entity
and will be listed on the NYSE. The company will maintain principal executive
offices in Ireland and operational headquarters in Minnesota. Through this
combination, Medtronic plc is expected to generate significant free cash flow,
which it will be able to deploy with greater strategic flexibility,
particularly in the U.S.Â
Updated information concerning the transaction, including a fact sheet and
investor presentation, is available at investorrelations.medtronic.com and
globalmedtechleader.com.
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