China Joins U.S., EU and Canada in Approving Medtronic-Covidien Deal

U.S., European Canadian regulators green-lit Medtronic Inc.’s much-anticipated acquisition of Dublin, Ireland-based Covidien plc during Thanksgiving week; and China joined with its approval on Dec. 4. The approvals follow Covidien’s sale of its Stellarex drug coated balloon device to Spectranetics Corp., which was agreed upon in early November.

The U.S. Federal Trade Commission (FTC) and European Commission (EC) have okayed the deal on the condition that Medtronic divest Covidien’s drug coated balloon business, as both companies had devices in the clinical trial stage that were very similar to each other. The drug-coated catheters in development treat peripheral artery disease. Stellarex would compete with Medtronic’s drug coated balloon device In.Pact. when released.

The EC was previously concerned that the acquisition would remove a credible future competitor of Medtronic, and therefore reduce innovation. Selling Stellarex to Spectranetics Corp. for $30 million addresses this issue, and under a proposed consent order, a monitor will supervise the transfer of Covidien’s drug-coated catheter business to the Colorado Springs, Colo.-based company.

The FTC and Health Canada approved the deal on Nov. 26, the FTC with a 5-0 vote. Two days later, the EC followed. 

The proposed acquisition has also been cleared by the South Korean Fair Trade Commission and all necessary antitrust clearances have now been obtained.

The $43 billion transaction is expected to close in early 2015 after receipt of certain additional regulatory clearances, approvals by both companies’ shareholders and sanction by the High Court of Ireland. 

Medtronic is expected to sell at least $10 billion of bonds to help pay for the acquisition, making it one of the largest bond deals of the year, according to investors familiar with the deal. Final prices and the size of the deal haven’t been set, but the maturities of the debt are expected to range from three to 30 years. A 10-year bond is being offered to yield about 1.55 percentage points more than benchmark U.S. Treasurys. The acquisition allows Medtronic to relocate its headquarters in Ireland once the merger is completed, an inversion deal aimed at taking advantage of lower corporate-tax rates overseas. The company previously indicated it was seeking to take on $16 billion in debt to help pay for its $43 billion takeover of Covidien. Medtronic initially planned to partially pay for the deal with $13.5 billion in cash held by its foreign subsidiaries, but decided instead to tap credit markets after a tax-rule change from the Obama administration.