Covidien Restructuring Operations to Save Money

Covidien plc is looking to save cash by streamlining operations and locations.

The Dublin, Ireland-based firm (U.S. headquarters are in Mansfield, Mass.) filed intentions to restructure with the U.S. Securities and Exchange Commission (SEC). The company’s board has approved the plan.

“The plan was developed to continue to drive efficiencies and improve the company’s cost structure,” company officials wrote in the SEC statement. “The plan will focus on creating efficiencies by, among other things, reducing corporate expense, expanding the use of shared services in low-cost locations, outsourcing services where appropriate, streamlining the company’s organizational structure, consolidating manufacturing locations, consolidating and optimizing distribution centers and expanding low-cost country sourcing.”

The firm anticipates savings of $250 million to $300 million, which will start in fiscal 2014 and increase in 2015. The company predicts that the restructuring will be complete by the end of fiscal 2018. But even the savings come with a price tag—approximately $350 million to $450 million, the company estimates. Most of the cost is expected to be incurred by the end of fiscal 2018. Approximately $100 million will be non-cash charges associated with facility closures, and the remainder will relate primarily to severance and termination costs. The company currently has approximately 43,400 employees.

It is not yet clear which of its manufacturing facilities throughout the United States and Europe will be affected. The company currently has 41 plants in 17 countries. Covidien recently opened $21 million product research, development and training center in South Korea.

In June, Covidien PLC completed the spinoff of its pharmaceuticals business, Mallinckrodt PLC, into a separate company, about a year and half after unveiling plans to split in two.

According to a company spokesman following the SEC filing: “The company must meet the challenge of operating as a smaller company and lowering its operating costs while still delivering the same quality products, value and service to customers around the globe.”