(Adds CEO comments, earnings details)
By Susan Kelly
Aug 19 Medtronic Inc Chief Executive
Omar Ishrak defended his company's plan to acquire Dublin-based
Covidien Plc in a so-called inversion deal, saying the
medical device maker will be able to create more U.S. jobs while
still paying substantial taxes once the transaction closes.
Medtronic, which announced its $42.9 billion acquisition of
Covidien in June, is among a number of U.S. corporations that
have unveiled inversion deals in recent months to establish a
tax domicile abroad.
President Barack Obama has criticized the strategy as a rush
by companies to avoid U.S. corporate taxes, and the
administration is weighing executive actions.
Medtronic has maintained the main rationale for the deal is
strategic, combining the two companies' complementary product
lines, and will free up cash generated overseas for reinvestment
in the United States.
Ishrak, in remarks during the company's earnings conference
call on Tuesday, said Medtronic expects to invest "much more
aggressively" in the United States after the deal closes,
resulting in accelerated creation of high-paying U.S. medical
"Acquiring Covidien is good for Medtronic, for our
shareholders, for patients, for the medtech industry and
ultimately good for the U.S. economy," he said.
In an interview, Ishrak said the company's effective tax
rate on global income will fall to about 16-17 percent after the
deal from 18-19 percent now.
Medtronic on Tuesday reported the strongest quarterly U.S.
sales growth for its medical devices in five years and said it
was committed to completing the Covidien acquisition by the end
of the year or early 2015.
The Minneapolis-based company also confirmed its full-year
profit and revenue outlook. The company's shares were flat at
$63.60 in midday trading.
Net earnings fell to $871 million, or 87 cents a share, in
the first quarter ended July 25 from $953 million, or 93 cents a
share, a year earlier.
Excluding restructuring charges and costs related to the
Covidien acquisition, Medtronic earned 93 cents a share.
Analysts on average expected 92 cents, according to Thomson
Revenue rose 4 percent to $4.27 billion, while analysts had
forecast $4.25 billion.
U.S. revenue increased 6 percent to $2.33 billion, buoyed by
new products, including an implanted diagnostic monitor for the
heart called Reveal, that offset weakness in its core markets
for spinal devices and implantable cardioverter defibrillators.
The company's new CoreValve replacement heart valve in the
two quarters since its launch has captured 40 percent of the
U.S. market for valves that can be implanted in a less-invasive
procedure than traditional open-heart surgery, Medtronic said.
It competes against Edwards Lifesciences Corp's Sapien
Medtronic reiterated its outlook for fiscal 2015 profit of
$4.00 to $4.10 a share, excluding special items, and revenue
growth in the range of 3 percent to 5 percent adjusted for
(Reporting by Susan Kelly in Chicago; Editing by Jeffrey
Benkoe, Lisa Von Ahn and Cynthia Osterman)