Medtronic Adds Two Europe-Based Firms to its Portfolio

Two recent acquisitions by Medtronic Inc. strengthen the company’s increasingly strong ties to Europe.

The Minneapolis, Minn.-based device giant is buying another company across the pond. After announcing a $42.9 billion acquisition of Ireland-based Covidien plc, the company announced on Aug. 27 that it paid $350 million to buy NGC Medical S.p.A., a privately held Italian company that manages cardiovascular suites, operating rooms, and intensive care units for hospitals. Medtronic already owned 30 percent of the business, which works with hospitals in Italy but also is expanding in Europe, the Middle East, and Africa.

“I am delighted that NGC will join Medtronic and add to our offering to hospitals and health systems. As we are all acutely aware, current models of delivering healthcare are not sustainable, and Medtronic is intent on finding new ways to partner with physicians, hospital systems, patients, payers and governments around the world to meet their cost and access challenges and to deliver high-quality healthcare,” said Rob ten Hoedt, executive vice president and president of Medtronic’s European business. “Medtronic has made significant progress over the past year since launching our hospital solutions business. NGC’s managed services expertise further enhances this momentum.”

The day before its announcement, the company reported that it was spending $200 million in cash to buy privately held Sapiens Steering Brain Stimulation, based in Eindhoven, the Netherlands, which develops deep brain stimulation (DBS) technologies.

The system being developed by Sapiens would allow for more precise stimulation of intended targets in a patient’s brain, according to Medtronic. Sapiens and Medtronic will continue work on the project while beginning clinical research into integrating the technologies into Medtronic’s existing portfolio. “This acquisition broadens our neuroscience position with brain modulation technology that, along with our portfolio of DBS solutions, may one day transform the way physicians are able to treat patients with neurodegenerative diseases like Parkinson’s disease and essential tremor,” said Lothar Krinke, Ph.D., vice president and general manager of the Brain Modulation business at Medtronic.

The Eindhoven facility will serve as a global research and development center for Medtronic’s Neuromodulation business, complementing the firm’s existing research and development operations, officials noted.

Medtronic’s plan to acquire Covidien is part of an “inversion” deal in which Medtronic moves its base to Ireland—benefiting from that country’s lower tax rates. Medtronic shareholders will control the combined company, which will be led by current Medtronic chairman and CEO Omar Ishrak. The combined company also will keep its operational headquarters in Minneapolis, where Ishrak and other key executives will continue to be located.

An inversion happens when a U.S. corporation and a foreign company combine, with the new parent company based in the foreign country. For tax purposes, the U.S. firm becomes foreign-owned, even if all the executives and operations stay in the United States. Medtronic is among a number of other U.S. companies that have concluded or are in the process of completing inversion deals. (See Financial News on page 20 for more details on inversions.)