June 16 - Medtronic's move could spur other healthcare companies to buy foreign manufacturers in a bid to lower taxes, says an anlayst. Fred Katayama reports.
Lower taxes is fast becoming the new corporate dowry. Medtronic will pay nearly $43 billion to buy Covidien in a marriage of American and Irish medical device makers. Medtronic will move its headquarters to Dublin where Covidien lives to lower its taxes. An analyst at William Blair calculates the move will save Medtronic about $250 million a year in taxes. Most recently, Pfizer's failed attempt to buy Britain's AstraZeneca generated buzz because Pfizer planned to make the UK its new tax home.. Medtronic says it's still committed to the U.S., pledging to invest $10 billion in technology here over the next decade. Stocks of both Medtronic and Covidien soared at the market open. Analysts say the merger also makes strategic sense. Adding surgical equipment to Medtronic's lineup of pacemakers and spinal implants would help it better compete for business at hospitals. But it's the tax benefit that sets this deal apart. J.P. Morgan analyst Michael Weinstein, who upgraded Medtronic, says "as a Medtronic-Covidien deal becomes a reality, other companies will likely look at the possibility of doing something similar." Among the most likely to follow suit, he predicts, are CareFusion and Stryker.