Medtronic agrees to acquire Irish health care company for nearly $43 billion

Fridley-based Medtronic has agreed to buy Irish health care products company Covidien for $42.9 billion in cash and stock.

The company announced the deal Sunday night.

The deal will move Medtronic's principal executive offices to Ireland, where Covidien is based. Medtronic's operational headquarters and CEO will remain in Minnesota, where the company currently employs more than 8,000 people.

Gov. Mark Dayton reacted to the announcement in a statement. "My primary concerns were this merger's effects on the Minnesotans currently working at Medtronic, and its implications for the company's continued growth here," he said. "I am greatly reassured by Medtronic's assurances that their commitments to their Minnesota headquarters and their Minnesota employees will continue to grow in the years ahead."

A statement from the companies indicates there will be $850 million in cost cuts from reducing duplicate corporate functions.

Analysts have speculated such a move would be designed to reduce Medtronic's corporate tax burden.

Ireland currently has a corporate tax rate of 12.5 percent, while the U.S. corporate tax rate is around 35 percent.

The story elsewhere

• New York Times: Medtronic agrees to merger and will move to Ireland

The transaction is also the latest in a wave of inversions, as American companies seek foreign acquisition targets in order to lower their corporate tax rate. Through such deals, the acquirers relocate to the target company's home base -- usually a lower-tax jurisdiction like Ireland or the Netherlands -- and substantially reduce their taxes.

Companies have regularly complained about the United States' corporate tax rate of 35 percent, one of the world's highest. That puts them at a disadvantage to rivals in other countries, even if they have substantial American operations.

• Reuters: Medtronic to buy Covidien for $42.9 billion, rebase in Ireland

The deal will allow Medtronic to reduce its overall global tax burden. The Minneapolis-based company said the move was not driven by tax considerations, pointing instead to medical technology synergies with Covidien.

The merger of Medtronic, the world's largest stand-alone medical device maker, and Covidien, a maker of devices used in surgery, will create a close competitor to the medical device business of Johnson & Johnson Co.