EU Approves Medtronic's $43 Bln Acquisition Of Covidien

(RTTNews) - The European Commission, the European Union's antitrust authority, said Friday it has approved medical device maker Medtronic Inc.'s (MDT) proposed $43 billion acquisition of smaller rival Covidien plc (COV), subject to conditions. The approval comes just two days after the the U.S. Federal Trade Commission cleared the deal.

The European Commission noted Friday that the approval of the acquisition is conditional upon the divestment of Covidien's Stellarex, a drug-coated balloon currently in development that when launched, would compete with Medtronic's drug coated balloon device In.Pact.

Medtronic said in mid-June that it agreed to acquire Covidien in a cash and stock deal valued at about $42.9 billion. The deal will help Medtronic shift base to Ireland and save it from paying high U.S. corporate taxes.

The EC said Friday that it had concerns that the transaction, as initially notified, would have removed a credible future competitor of Medtronic and also reduced innovation in this area. However, the commitments offered by Medtronic have addressed these concerns.

According to the EC, its investigation indicated that the transaction would raise no competition concerns, except in the market for drug-coated balloons. However, the EC noted that Medtronic has committed to sell Covidien's worldwide Stellarex business, including manufacturing equipment, related IP rights as well as scientific and regulatory material necessary for ensuring the completion of the Stellarex trials.

Further, Medtronic has committed that for a transitional period, it will supply the purchaser with the balloons on which the drug is applied, as well as transfer staff, including some key personnel. This will provide the purchaser with all assets necessary to bring Stellarex to the market and remedy the identified competition concerns.

In early November, Spectranetics Corp. (SPNC) has agreed to acquire Covidien plc's (COV) Stellarex drug-coated angioplasty balloon or DCB platform for $30 million. The deal will expand Spectranetics' portfolio of solutions to treat complex vascular conditions in the projected $700 million drug-coated balloon segment.

On Wednesday, Medtronic and Covidien said that the U.S. Federal Trade Commission cleared Medtronic's proposed acquisition of Covidien.

The FTC clearance follows Medtronic's and Covidien's agreement to a proposed consent order, which includes a commitment to divest certain assets related to Covidien's drug-coated balloon catheter product.

Medtronic and Covidien also entered into a parallel consent agreement regarding the divestiture of assets related to Covidien's drug-coated balloon catheter product with the Canadian Competition Bureau, which also announced its clearance of the deal Wednesday.

Medtronic's acquisition of Covidien is expected to close in early 2015 after receipt of certain additional regulatory clearances and approvals by both companies' shareholders, in addition to sanction by the High Court of Ireland.

MDT closed Wednesday's trading at $73.48, up $0.69 or 0.95 percent on a volume of 5.06 million shares. COV closed trading at $100.54, up $1.22 or 1.23 percent on a volume of 2.30 million shares.