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Medtronic to Utilize External Debt to Finance Its Acquisition of Covidien BY ANDREW VAHRADIAN, OCTOBER 6, 2014

Medtronic disclosed that it intends to use approximately $16 billion in external financing to complete its previously announced $43 billion acquisition of Covidien plc, rather than utilizing a combination of a $13.5 billion intercompany loan from a foreign subsidiary, and $2.8 billion in external debt, as previously planned.

Part of the reason Medtronic has changed the deal structure is because last month, the U.S. Department of Treasury, declared that it intends to ratify new tax laws in which U.S. companies would start to be taxed on so-called “hopscotch” loans, designed to circumvent U.S. taxes by loaning cash held offshore among corporate subsidiaries without bringing it back into the United States.

All other terms and conditions of the definitive agreement reached between Medtronic and Covidien in June, when the deal was announced, remain unchanged. Upon the closing of the deal, 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. The transaction is still expected to be accretive to Medtronic's cash earnings in its FY2016.

Medtronic anticipates the transaction to be completed in late 2014 or early 2015.

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