(Adds analyst comment, details on company product lines)
By Soyoung Kim and Susan Kelly
NEW YORK/CHICAGO, June 14 U.S. medical device
maker Medtronic Inc is in advanced talks to buy rival
Covidien Plc in a deal valued at $45 billion to $50
billion, people familiar with the matter said on Saturday.
The deal, which would allow Medtronic to be domiciled in
Ireland, where Covidien is based, and thus take advantage of
lower tax rates, could come as soon as Monday, one person said,
asking not to be named because the matter is not public.
Minneapolis-based Medtronic, the world's largest stand-alone
medical device maker, with an array of products ranging from
heart defibrillators and stents to insulin pumps and spinal
implants, has a market value of about $61 billion. Covidien, a
maker of devices used in surgery, is valued at about $32
In a market that has seen an accelerated pace of
deal-making, some aimed at redomiciling major U.S. companies
overseas, Pfizer Inc recently mounted an abortive
takeover bid for British-based AstraZeneca in what would
have been a roughly $120 billion deal aimed in part at lowering
the U.S. drug firm's corporate tax rate.
Medical device makers in recent years have struggled with
slowing sales and pricing pressure as governments overseas slash
budgets and the United States transforms its healthcare system
under the Affordable Care Act.
In addition, hospitals are looking to reduce supply costs in
part by consolidating vendors amid sluggish demand for services
as patients avoid going to the doctor because of a lack of
insurance or rising out-of-pocket costs for care.
"It makes sense on a lot of levels, both strategic and
financial," Jefferies analyst Raj Denhoy said of the potential
combination. There are a lot of reasons to believe it is going
Acquiring Covidien, with its focus on minimally invasive
surgical procedures, would help expand Medtronic's footprint in
the marketplace, as the two companies have very little product
overlap, Denhoy said.
The medical device industry is seeing more mergers such as
Zimmer Holdings Inc's recently announced $13.4 billion
takeover of smaller rival orthopedic device maker Biomet Inc as
companies in the sector move to cut costs and become more
Pfizer's bid for AstraZeneca, which was rejected, was one of
a few recently launched major deals that have looked to take
advantage of an increasingly popular tax-lowering strategy known
as an inversion.
Several smaller transactions have succeeded, drawing the
attention of U.S. lawmakers in Congress who are targeting
legislation that would make it much more difficult for U.S.
companies to do profitable inversions.
A Reuters review showed about 50 such deals had been done in
the past 25 years, with half occurring since the 2008-2009
credit crisis abated.
Officials at Medtronic and Covidien declined to comment on
the news, which was earlier reported by the Wall Street Journal.
(Reporting by Soyoung Kim in New York and; Susan Kelly in
Chicago; Editing by Eric Beech, Bernard Orr, Gunna Dickson and