Pfizer’s attempted acquisition of AstraZeneca was rebuffed and AbbVie pulled out of its $54bn takeover of Shire at the eleventh hour, but one proposed megamerger of 2014 that looks likely to go through is Medtronic’s $42.9bn bid for medical device and supply firm Covidien.
Yesterday shareholders from both firms voted an overwhelming ‘yes’ to the deal set to create the world’s largest medical technology and services company, with 87,000 employees in over 150 countries offering a comprehensive combined portfolio of products.
The merger was first proposed in June with Medtronic stating the deal would support its fundamental strategies of therapy innovation, globalisation and economic value.
Speaking at the recent FT Global Pharmaceutical and Biotechnology Conference in London, UK, Medtronic’s EVP and President of EMEA & Canada, Rob ten Hoedt, reaffirmed this merger was “all about strategy” rather than about scale or tax.
“The proposed acquisition of Covidien is the ability to become truly the largest possible supplier,” he told delegates. “Since the Covidien product line is completely complementary to the Medtronics today, it will enable us to deploy some of our brand new business models in a way we go into clinics and participate in the delivery of care.”
Covidien is headquartered in Ireland, but ten Hoedt was resolute the acquisition by Minneapolis-based Medtronic was not an inversion deal.
“This is far and away from a tax deal. The deal with Medtronic and Covidien is absolutely based on strategic fit – that was our drive. If you look at the tax rate between the two companies there is almost no difference so we shouldn’t pay $42bn for 1% tax advantage. So this is a clearly strategic deal.”
He also spoke about the differences in bringing innovations in medical device to market, as compared to pharma innovation.
“Our pathways are a lot shorter with continuous improvement of those technologies carried out across their lifetime,” he said. “This creates a completely different business model, and also allows us to be much quicker in introducing technologies and getting innovations into the market.”
In 2013, Covidien span-out its pharmaceutical development and manufacturing division Mallinckrodt.