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Medtronic finalizes $42.9b Covidien deal

Buyout is among largest in sector

Medtronic Inc. completed its $42.9 billion takeover of Covidien PLC on Monday, outlining plans to run the Massachusetts company as a separate business unit focused on surgical tools and hospital supplies while retaining the vast majority of Covidien’s employees.

Reiterating his company’s plans to invest $10 billion in medical technology research and development over the coming decade, Omar Ishrak, Medtronic’s chief executive for the past 3½ years, said that much of the spending will be in Massachusetts, Minneapolis, and on the West Coast.

“It’s very likely that a lot of this investment will go in the Boston area,” Ishrak said Monday.

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The buyout is one of the largest ever in the medical technology sector, joining two industry titans that Ishrak said share “a strong alignment in our values and our mission.”

It took effect after the Irish High Court earlier in the day approved an arrangement that would allow Minneapolis-based Medtronic, one of the world’s biggest medical device makers, to shift its global headquarters to Ireland to reduce corporate taxes.

Ireland maintains a corporate tax rate of 12.5 percent, compared with a rate of 35 percent in the United States, one of the highest rates in the world.

Under the arrangement, called an inversion, Medtronic will set up a holding company incorported in Ireland and called Medtronic PLC. It will own both companies. Covidien, which is already technically based in Ireland, kept its management team and US headquarters in Mansfield. The companies together have about 4,000 employees in Ireland.

Medtronic’s management and operational headquarters will remain in Minneapolis.

Executives at Medtronic, which has been pursuing a strategy of innovation, expanding globally, and offering more products and services to its customers, said there is relatively little overlap between its own product offerings and those of Covidien.

Formerly known as Tyco HealthCare, Covidien has about 38,000 workers globally, including 1,800 in Massachusetts.

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Before the acquisition was consummated, Medtronic had about 49,000 employees globally. But outside of an operation in Portsmouth, N.H., that makes electrosurgical products, it has had a relatively small presence in New England. The purchase of Covidien, which operates the former US Surgical business in New Haven, will make it a much larger player.

Medtronic currently runs three divisions. Its cardiac and vascular group, which competes with Natick-based Boston Scientific Corp., sells products such as defibrillators, heart valves, and stents. Its restorative therapies business sells a range of products including pacemakers and replacement discs for spinal procedures. And its diabetes group sells products ranging from insulin pumps to glucose monitoring systems.

Regulators forced Covidien to divest a drug-coated balloon it was developing because it overlapped with an existing Medtronic product.

But although some other Covidien products will be merged into Medtronic’s existing business groups, most will remain in the new surgical tool and hospital supplies group being created from the Covidien buyout.

The new division will be based in New Haven but have a large presence in Mansfield, Ishrak said. He added that several Covidien executives will remain with Medtronic, though most will leave.

Medtronic has established a target of reducing its overall operating costs by $850 million over the next three years through a variety of steps that may include the closing of some sites and elimination of some jobs. But the company is not specifying how many jobs might be cut at Covidien.

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Robert Weisman can be reached at robert.weisman@globe.com. Follow him on Twitter @GlobeRobW.