Medtronic updates on $43B Covidien deal financing

October 24, 2014 By Brad Perriello Leave a Comment

Medtronic (NYSE:MDT) said today that it plans to assume some $16 billion in U.S. debt to help pay for its $43 billion acquisition of Covidien (NYSE:COV), slated to close late this year or early in 2015.

The Fridley, Minn.-based medical device company had planned to use about $13.5 billion in overseas cash for the merger, but new U.S. Treasury rules instituted last month prompted it to change the structure of the deal.

In a regulatory filing today, Medtronic said the new debt, at a rate of 4.0% to 4.5%, is expected to be in place before the deal closes. The company is targeting an "A" credit rating on the debt, which would keep it out of junk bond status.

Standard & Poor’s, which has a negative credit watch on Medtronic, reiterated the watch Oct. 3 on news of the new debt financing plan.

"We now expect to lower the corporate credit rating and the issue-level ratings by 2 notches, to ‘A’ and to lower the short-term rating to ‘A-1’, if the transaction is consummated as expected," the ratings agency said.

Standard & Poor’s had said it expects Medtronic’s pro forma adjusted net leverage ratio to be about 2x to 2.2x after the deal. Today Medtronic said its pro forma net debt to EBITDA would be 1.9x at closing and move to 0.7x in fiscal 2018, with pro forma gross debt to EBITDA at 3.7x at closing before moving to 2.7x in fiscal 2018 and to 2.3x beyond that.

In its Oct. 3 release, Standard & Poor’s said the new debt would mean "a modest increase in net leverage (per our calculations), relative to our prior expectations, due to the haircut we apply to cash balances."

Medtronic also said the deal would be neutral to earnings in fiscal 2019, rather than in fiscal 2018 as previously expected, but will be accretive on a cash EPS basis in fiscal 2016 with "significant accretion thereafter." The deal will also lower Medtronic’s overall tax rate by 2%, according to the filing.

Could this 3D bioink printer speed wound healing?
The University of Toronto is touting a new handheld 3D printer that can deposit sheets of skin to cover burn wounds and accelerate the healing process. A study, led by Richard Cheng under the supervision of Axel Guenther, published in Biofabrication revealed that the 3D printer completed successful in-vivo trials on full-thickness wounds, according to a report… […]
8 types of FDA-approved devices that treat the heart
Just starting to learn about all of the medical devices out there for treating cardiovascular diseases? The U.S. FDA has a good, basic roundup on its website of the most common types of cardiovascular devices it regulates. Here’s the list, along with the FDA’s descriptions: 1. Automated external defibrillators (AEDs) “Portable and automatic, these devices… […]
Medtronic seeks to boost surgical robotics play with Digital Surgery acquisition
Medtronic (NYSE:MDT) announced today that it has acquired Digital Surgery (London), a privately-held pioneer in surgical artificial intelligence, data and analytics, and digital education and training. Financial terms of the deal were not disclosed. Medtronic said the purchase will strengthen its robot-assisted surgical platform and its broader portfolio. The medical device giant is making a big play… […]
Solvay expands advanced materials offerings in the medtech space
Solvay, a supplier of advanced materials and specialty chemicals, announced a pair of advances that it hopes will help it expand its healthcare business. Speaking yesterday at Solvay’s booth (#2414) at MD&M West, the company’s healthcare sales development manager Rose Catherin said the new materials will help improve the performance of specialty surgical devices including… […]
11 states ask EPA to crack down on ethylene oxide emissions
Eleven state attorneys general are urging the U.S. Environmental Protection Agency to impose stricter regulations over commercial operations that emit ethylene oxide (EtO), a widely used medical device sterilant gas. The EPA, which considers EtO a carcinogen, has been fielding comments on it in light of public outcry over emissions from medtech sterilization plants during… […]
Is it possible to ‘knit’ replacement blood vessels?
A new way to replace a patient’s damaged blood vessels may be on its way, as researchers in France are figuring out a way to “knit” new vessels with a collagen-based extracellular matrix. Inserm researcher Nicolas L’Heureux and his colleagues at Inserm/Université de Bordeaux’s tissue bioengineering unit published a study in Acta Biomaterialia to outline… […]
Applied Plastics has a new website, online store
Applied Plastics (Norwood, Mass.) — maker of PTFE-coated products for advanced catheter systems — announced today that it is rebranding to improve its customer interface and support continued growth. The rebranding includes a new website, online store and refreshed brand identity. The company this week is showing off the new look and its online PTFE… […]
How to select miniature motors for surgical robotics
Surgical robotics is leveraging the same sterilizable brushless direct current (BLDC) motors already used for decades in surgical hand tools. It’s all about torque, speed and reliability — as well as sterilization requirements. Keith Halbert, Portescap Today’s surgical robotics and robotically-assisted surgical devices often require BLDC motors to meet demanding requirements. While motors and motion… […]
What is an autoclave cycle?
Keith Halbert, Portescap The most common sterilization method used in hospitals is autoclaving, also called steam sterilization. During autoclaving, surgical handtools are exposed to 100% humidity, 135ºC (275ºF) and pressure variations for up to 18 minutes. Most autoclaves also have additional vacuum cycles to facilitate steam penetration and kill viruses, fungi, bacteria, and spores that… […]
BioIntelliSense wins FDA nod for BioSticker continuous vital sign monitor
BioIntelliSense announced that it won FDA 510(k) clearance for its BioSticker on-body sensor for scalable remote care and initiated the U.S. commercial launch of the product last week. The BioSticker is designed to allow for continuous monitoring of vital signs and actionable insights to provide opportunities for early detection of potentially avoidable complications from a home… […]
Accu-Tube acquires Mercury Tube
Stainless steel tubing outfit Accu-Tube announced today that it has acquired Mercury Tube, another metal tube manufacturer in its home base of Englewood, Colo. Mercury Tube, which makes high-precision stainless steel and high nickel alloy tubing, will operate as a wholly-owned subsidiary of Accu-Tube. Financial terms of the deal were not disclosed. Get the full… […]