Jun 16, 2014, (Memphis Business Journal/Michael Sheffield)–After Medtronic Inc. completes its $42.9 billion merger with Covidien, Medtronic Spinal, the company’s Memphis-based division, could see new technology and a share of $10 billion the company is planning to invest in its U.S. operations.
Fernando Vivanco, senior director of corporate communications for Medtronic, said the details on when the investment would be made and how it would be divided up “hasn’t been sorted through,” but he stressed there would be no negative impact on Medtronic Spinal.
“If you look at this merger, it’s about growing the business,” Vivanco said. “Medtronic has a solid track record of growing the companies we acquire and we anticipate continuing that trend.”
One change that will be coming soon is Medtronic’s plan to move its legal headquarters to Ireland, where Covidien is based. However, the company’s CEO Omar Ishrak will remain in its “operational headquarters” in Minnesota.
According to Charlie Whelan, lead analyst for Frost & Sullivan Advance Medical Technologies, Medtronic’s decision to relocate the headquarters was made mainly to reinvest overseas cash into overseas operations without having to pay a “hefty corporate tax premium,” a practice that other companies like Apple Inc. have done.
“You find an existing company with the right synergies and a headquarters overseas and reinvest the money without the tax debt,” Whelan said. “Their international division has grown faster than the national division, and Ishrak has stated that growth is very important.”
Whelan said while both companies don’t have much, if any, overlap with their products, their existing products complement each other and could bode well for future product development.
“This isn’t one company buying another in the same marketplace,” Whelan said. “A number of Covidien’s products could only boost the spinal division. I don’t see this as a bad thing for Memphis.”