Medtronic, Inc. Reaffirms Commitment To Covidien Transaction

(RTTNews) - Medtronic, Inc. (MDT) announced that it plans to utilize $16 billion in external debt to finance cash portion of transaction to complete the acquisition of Covidien plc (COV) instead of using cash from its foreign subsidiaries as previously planned.

The company said the definitive agreement terms reached between the two companies in June remain unchanged.

To fund the cash portion of the transaction, Medtronic now intends to utilize new financing expected to be in place by closing of the transaction. As announced in June, upon completion of the transaction, each outstanding ordinary share of Covidien will be converted into the right to receive $35.19 in cash and 0.956 of an ordinary share of Medtronic plc, the parent company of the new combined entity.

Despite the additional expense of the new financing, the transaction is still expected to be accretive to Medtronic's cash earnings in FY2016, the first full fiscal year, and significantly accretive thereafter. The transaction is also expected to be neutral to GAAP earnings by FY2019 and accretive thereafter, the company said.

Further, Medtronic added that this announcement does not affect Medtronic's FY2015 revenue outlook and earnings per share guidance, as the company's outlook and guidance does not contemplate the expected closing of the Covidien transaction.

As provided in the June 15 transaction agreement, a new Irish holding company - Medtronic plc - will serve as the parent company of the new combined entity and will be listed on the NYSE.