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Medtronic-Covidien Merger Set to Close This Month

The Irish High Court has agreed to hold a hearing January 26 to decide on the proposed $48 billion merger between Medtronic and Covidien, according to a Monday filing that Covidien made with the U.S. Securities and Exchange Commission.

If the court sanctions the deal, the transaction is expected to close on or close to January 29.

The announcement comes less than a week after shareholders of Fridley, MN-based Medtronic and Dublin, Ireland-based Covidien overwhelmingly approved the companies' merger, which will create a new Medtronic based in Ireland.

The Covidien purchase marks the largest acquisition in Medtronic history. Medtronic intends to pay $35.19 per share of Covidien and exchange each Covidien share for 0.956 shares in the new company, Medtronic plc, the Star Tribune reported. When Medtronic announced the transaction in June, it listed an approximate price of $42.9 billion in stock-and-cash transaction. The final price will be determined by the value of Medtronic stock on the date of closing, which could result in a $48 billion deal.

The Medtronic-Covidien deal and others like it have drawn ire from President Barack Obama and other progressive politicians because they involve American companies using mergers with overseas companies to move their headquarters out the country--reducing corporate taxes owed in the process. But officials at Medtronic and Covidien argued that the merger made plenty of strategic sense even without the tax benefits. The new Medtronic would rival Johnson & Johnson as the largest medical device company in the world.

The Treasury Department in late September announced that it is cracking down on many of the financial mechanisms--from so-called "hopscotch loans" to stock transaction mechanisms--that inverted companies use to access the overseas earnings of foreign subsidiaries of the U.S. company that inverts without paying U.S. tax. It was exactly such financial mechanisms that Medtronic was expected to utilize after merging with Covidien and moving its official headquarters to Ireland.

Officials at the two companies, though, proceeded with the merger anyway.

Check out Qmed's timeline of the deal, with links to key stories.

Refresh your medical device industry knowledge at MD&M West, in Anaheim, CA, February 10-12, 2015.

Chris Newmarker is senior editor of Qmed and MPMN. Follow him on Twitter at @newmarker.

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