Five top executives of Mansfield-based health care supplies company Covidien PLC stand to pocket a total of nearly $80 million in severance pay if they leave after Covidien is acquired by medical device giant Medtronic Inc., according to a regulatory filing.
Medtronic said Sunday it had struck a deal to buy Covidien for $42.9 billion, in the largest purchase ever in the medical technology sector and the third largest takeover of a Massachusetts company, after Gillette Co. and FleetBoston Financial Corp.
Under a clause in a Jan. 24 proxy statement covering termination upon “change in control,” Covidien chief executive Jose E. Almeida would receive a severance payout of $37.3 million if he leaves Covidien when the buyout is complete. Charles H. Dockendorff, Covidien’s executive vice president and chief financial officer, would get $15.1 million in severance.
Other senior executives listed in the document are Bryan C. Hanson, group president for medical devices, who would get $10.5 million; Peter L. Wehrly, group president for developed markets, who would receive $9.3 million; and, John H. Masterson, senior vice president and general counsel, who would get $7.7 million.
Such severance payouts for high-ranking executives are common practice in the aftermath of corporate takeovers.
Covidien, formerly known as Tyco HealthCare, has about 38,000 employees worldwide, including about 1,800 in Massachusetts. While its US headquarters is in Mansfield, the company is incorporated in Dublin, where it enjoys a lower corporate tax rate. Medtronic’s deal is being structured as a so-called tax inversion that will enable the Minneapolis-based buyer to reincorporate in Ireland for tax purposes.
Medtronic executives said they expect to save about $850 million over the next two to three years by eliminating overlapping corporate functions, manufacturing plants, and information technology systems. The cost cutting — which is likely to result in job losses at Covidien — will help Medtronic invest about $10 billion in research and development in the United States over the next decade, executives said.