The move was prompted by the U.S. Treasury Dept.’s move last week to crack down on so-called "inversion deals," in which a U.S. company acquires a foreign entity – Covidien is domiciled in Ireland but runs its business from Massachusetts – and re-incorporates in that jurisdiction to avoid high corporate tax rates in the U.S.
All other terms of the deal are intact, according to a press release.
"This proposed acquisition was conceived and undertaken for strategic reasons and is intended to create a company that can treat more patients, in more ways and in more places around the world," Medtronic chairman & CEO Omar Ishrak said in prepared remarks. "We believe our combination will be uniquely positioned to help advance the goals of the Affordable Care Act in the U.S. as well as the objectives of virtually all health systems– to drive access to high-quality, affordable health care for patients around the world. Since the announcement of this transaction, we have worked closely with our Covidien colleagues to plan for the integration of these 2 leading companies, and we look forward to closing the transaction and realizing these strategic benefits."
Medtronic said the new financing terms won’t affect the deal’s impact on earnings.
"The transaction is still expected to be accretive to Medtronic’s cash earnings in FY2016, the 1st full fiscal year, and significantly accretive thereafter. The transaction is also expected to be neutral to GAAP earnings by FY2019 and accretive thereafter," according to the release.
Medtronic did not change its outlook for fiscal 2015 and said the deal is still on track to close later this year or in early 2015.