Medtronic 2014 Annual Report Download - page 19

Pending Acquisition of Covidien plc
On June 15, 2014, Medtronic entered into a Transaction Agreement (the Transaction Agreement) by and among Medtronic,
Covidien public limited company, an Irish public limited company (Covidien), Kalani I Limited, a private limited company
organized under the laws of Ireland (New Medtronic), Makani II Limited, a private limited company organized under the laws
of Ireland and a wholly-owned subsidiary of New Medtronic (IrSub), Aviation Acquisition Co., Inc., a Minnesota corporation
(U.S. AcquisitionCo), and Aviation Merger Sub, LLC, a Minnesota limited liability company and a wholly-owned subsidiary of
U.S. AcquisitionCo (MergerSub). Under the terms of the Transaction Agreement, (i) New Medtronic and IrSub will acquire
Covidien (the Acquisition) pursuant to the Irish Scheme of Arrangement under Section 201, and a capital reduction under
Sections 72 and 74, of the Irish Companies Act of 1963 (the Arrangement) and (ii) MergerSub will merge with and into
Medtronic, with Medtronic as the surviving corporation in the merger (such merger, the Merger, and the Merger together with
the Acquisition, the Pending Acquisition). As a result of the Pending Acquisition, both Medtronic and Covidien will become
wholly-owned direct or indirect subsidiaries of New Medtronic.
At the effective time of the Arrangement, (a) Covidien shareholders will be entitled to receive $35.19 in cash and 0.956 of a
newly issued New Medtronic share (the Arrangement Consideration) in exchange for each Covidien share held by such
shareholders, and (b) each share of Medtronic common stock will be converted into the right to receive one New Medtronic
share. The total cash and stock value of the Pending Acquisition is approximately $42.9 billion based on Medtronic’s closing
share price of $60.70 on June 13, 2014. It is expected that immediately after the closing of the Pending Acquisition, Covidien
shareholders will own approximately 30 percent of New Medtronic on a fully diluted basis. Shares of New Medtronic are
expected to trade on the New York Stock Exchange.
The Transaction Agreement may be terminated by mutual written consent of the parties. The Transaction Agreement also
contains certain termination rights, including, among others, the right of either party to terminate if (a) the Arrangement has not
become effective by March 15, 2015 (the End Date), subject to certain conditions, provided that the End Date will be extended
to June 15, 2015 in certain circumstances, (b) the Covidien or Medtronic shareholder approvals are not obtained, (c) the other
party breaches its representations and covenants and such breach would result in the closing conditions not being satisfied,
subject to a cure period, (d) the Irish High Court declines to sanction the Arrangement, unless both parties agree to appeal the
decision, or (e) there is a failure of the tax condition as described in Medtronic’s Current Report on Form 8-K filed with the
SEC on June 16, 2014. Covidien also has the right, prior to the receipt of Covidien shareholder approval, to terminate the
Transaction Agreement to accept a Covidien Superior Proposal (as defined in the Transaction Agreement) in certain
circumstances.
The Transaction Agreement also provides that Medtronic must pay Covidien a termination fee of $850 million if the
Transaction Agreement is terminated because the Medtronic board of directors changes its recommendation for the transaction
and the Medtronic shareholders vote against the Transaction, and either (i) Covidien obtained the requisite Covidien shareholder
approval or (ii) Medtronic effected such termination prior to the completion of the Covidien shareholder meeting.
The consummation of the Pending Acquisition is subject to certain conditions, including approvals by Medtronic and Covidien
shareholders. In addition, the proposed transaction requires regulatory clearances in the U.S., the E.U., China, and certain other
countries. The Pending Acquisition is expected to close in the fourth calendar quarter of 2014 or early 2015.
For further information regarding the Pending Acquisition, see the section entitled “Risks relating to our pending acquisition of
Covidien plc” contained in “Item 1A. Risk Factors,” the section entitled “Executive Overview - Pending Acquisition of
Covidien plc” contained in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
and Note 21 to the consolidated financial statements in “Item 8. Financial Statements and Supplementary Data” in this Annual
Report on Form 10-K, and the full text of the Transaction Agreement, a copy of which is filed as exhibit 2.1 to our Current
Report on Form 8-K filed with the SEC on June 16, 2014.
Fiscal Year 2014
On December 30, 2013, the Company acquired TYRX, Inc. (TYRX), a privately-held developer of antibiotic drug and
implanted medical device combinations. TYRX’s products include those designed to reduce surgical site infections associated
with implantable pacemakers, defibrillators, and spinal cord neurostimulators. Under the terms of the agreement, the transaction
included an initial up-front payment of $159 million, representing a purchase price net of acquired cash, including the
assumption and settlement of existing TYRX debt and direct acquisition costs. Total consideration for the transaction was
approximately $222 million, which included estimated fair values for product development-based and revenue-based contingent
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