US medical device maker Medtronic said it had agreed to buy Covidien for $42.9 billion in cash and shares, the latest company to take advantage of lower corporate tax rate.
Tax inversion appeal
“It will have its principal executive offices in Ireland, where Covidien’s current headquarters resides and where both companies have a long-standing presence,” the company said in a statement.
The deal will allow Medtronic to reduce its overall global tax burden, so-called tax inversion.
Although the company explained it was driven by a complementary strategy with Covidien on medical technology instead of tax considerations.
The corporate tax rate in Ireland is 12.5%, while in the US, the tax rate can reach up to 35%.
Medical equipment sector
Industry experts said the merger of Medtronic and Covidien would create a close competition in the medical device business.
It allows the companies to compete for business from hospitals better, where healthcare efforts for medical procedures have kept pressure on device costs.