Medtronic, Inc. (NYSE:MDT) develops and manufactures innovative medical device technology to treat diseases world-wide. With a global reach that extends more than 140 countries Medtronic, Inc. (NYSE:MDT) have a deep understanding of many universal healthcare challenges.
Medtronic, Inc. (NYSE:MDT) has made an announcement earlier today that it has agreed to acquire Dublin, Ireland based Covidien plc (NYSE:COV) for $42.9 billion in cash and stock. In CNBC’s Closing Bell, Meg Tirrell discusses on whether this deal is more about taxes than the medical devices itself.
Tirrell started off saying that Medtronic, Inc. (NYSE:MDT) buying Covidien plc (NYSE:COV) for $42.9 billion and reincorporating in Ireland may be just to take advantage of the 12.5% tax rate. She continues that this move from Medtronic, Inc. (NYSE:MDT) is continuation of many other similar inversion deals in healthcare lately.
Tirrell stated the example from beginning of the year when Pfizer Inc. (NYSE:PFE) tried to buy Astrazeneca plc (ADR) (NYSE:AZN) for $120 billion to reincorporate in UK. That move did not go through but she thinks that we may see this come back again at the end of the year. She was also talking about couple of other deals in the last couple of years. Tirrell felt that all these deals show a continuing trend of consolidation among medical device companies.
Tirrell had some more examples to show the consolidation among medical device companies such as Zimmer Holding Inc. (NYSE:ZMH) & Biomet Inc. were consolidated earlier this year and Johnson & Johnson (NYSE:JNJ) bought Synthes couple of years back. She continues saying that Analysts feel these type of consolidations may be due to pricing pressure in the industry. Hospitals are trying to spend less money under Affordable Care Act. Due to this overall pricing pressure in the industry had gone up which may result in more such consolidations.
Tirrell also talks about the stock trend of Medtronic, Inc. (NYSE:MDT), saying that interestingly Medtronic, Inc. (NYSE:MDT) stocks after being up in beginning of the day had gone down by 1.1%. She was informed by analyst Josh Jennings that people were concerned if this move would not go through before Congress curbs these tax aversion capabilities of companies. Jennings thinks that that concern is over blown now but some proposals are batted around in Congress and the White house to curb this activity. So according to most analysts, the companies are trying to get their deals done before any proposal could be made by Congress.