Layoffs ahead for Covidien

September 19, 2013 by Brad Perriello

Covidien says it plans to consolidate its manufacturing and distribution operations as part of a global restructuring aimed at saving up to $300 million a year.

Layoffs ahead for Covidien

Covidien (NYSE:COV) said its board of directors authorized a restructuring plan aimed at saving up to $300 million a year by fiscal 2018, with manufacturing and distribution operations slated to be closed. Covidien did not reveal how many layoffs would be involved.

Mansfield, Mass.-based Covidien said the restructuring, "developed to continue to drive efficiencies and improve the company's cost structure," will include several elements aimed at "creating efficiencies," according to a regulatory filing.

"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," according to the filing.

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The Mansfield, Mass.-based medical device company said the plan is expected to run up $350 million to $450 million in pre-tax charges by the end of fiscal 2018, generating savings of between $250 million to $300 million beginning next year and accelerating in fiscal 2015. About $100 million worth of the pre-tax cost will come from facility closures, Covidien said, with the balance coming from severance and termination costs.

Covidien also said it's boosting its quarterly dividend by 23%, from 26¢ to 32¢ per share, meaning its annual dividend will rise from $1.04 per share to $1.28.