Medtronic announced on Sunday that it has agreed to acquire Irish medtech firm Covidien for $42.9 billion in cash and stock. The purchase is the largest acquisition of a foreign firm by a U.S. company, based on Standard & Poor's Capital IQ data.

The move stands to make Medtronic, which was already the fourth largest medical device firm, even more competitive. With total revenue of $14.3 billion, Covidien is a heavyweight in its own right, ranking as the eighth largest device company. In the same time period, Medtronic's total revenue was $16.7 billion. For the sake of comparison, diversified healthcare behemoth Johnson & Johnson had total revenue of $28.6 billion in that same time period.

The merger will give the firm 87,000 employees based throughout more than 150 countries. Executives at the company have indicated that strategic cost-cutting could follow, with approximately $850 million in potential cost savings earmarked over the course of the next two to three years. The Boston Globe anticipates the merger would hold the greatest threat to former Covidien employees. "It's expected that there will be some synergies in headquarters jobs, and the companies will address that as part of the integration planning," Covidien vice president Peter Lucht was quoted as saying in the paper. In all, Covidien employs about 38,000 internationally 1800 of which are based in Massachusetts.

The merger will also likely lead to consolidation of Medtronic plc's manufacturing operations spread across the globe.

On the upside, the deal will leave roughly $10 billion for Medtronic to invest on R&D in the United States over the next decade.

The acquisition has been termed as a "tax inversion" deal, which will help Medtronic lower its tax burden. Medtronic will be the biggest company in the United States to reduce its tax liabilities by moving its headquarters offshore.

The merged entity will be known as Medtronic plc. Medtronic's current CEO Omar Ishrak will be put at the helm of the combined company, who incidentally denied that the merger was motivated by a desire to lower its tax rate.

While the company will be officially headquartered in Ireland, it will still retain operational headquarters in Minneapolis.

The merger is expected to pass regulatory hurdles by the end of the year or by the early 2015.

The news seemed to please Coviden investors. That company's stock was up by 14.73 points, closing at 86.75 by the close of business on Monday. The stock price change represented a jump of 20.45%. By contrast, Medtronic's stock was down slightly--by 0.67 points to $58.70--a 1.10% dip.

Brian Buntz is the editor-in-chief of MPMN. Follow him on Twitter at @brian_buntz and Google+.