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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

Filed by the Registrant  þ                            Filed by a Party other than the Registrant  ¨

Check the appropriate box:

 

¨	Preliminary Proxy Statement

 

¨

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

x	Definitive Proxy Statement

 

¨	Definitive Additional Materials

 

¨

Soliciting Material Pursuant to §240.14a-12

MEDTRONIC, INC.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

þ	No fee required.

 

¨

Fee computed on table below per Exchange Act Rules 14a-60(i)(l) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

(5)

Total fee paid:

 

 

 

¨

Fee paid previously with preliminary materials.

 

¨

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

(3)

Filing Party:

 

 

 

(4)

Date Filed:

 

 

 

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To our Shareholders:

You are cordially invited to attend a special meeting of the shareholders of Medtronic, Inc. to be held on January 6, 2015 at 8:00 a.m. local time, at the Hyatt Regency, 1300 Nicollet Mall, Minneapolis, MN 55403.

As previously announced, on June 15, 2014, Medtronic entered into a Transaction Agreement with Covidien plc to acquire Covidien through the formation of a new holding company incorporated in Ireland that will be renamed Medtronic plc, which is referred to as New Medtronic. The acquisition of Covidien will be effected by means of a “scheme of arrangement” under Irish law, subject to the approval of the Irish High Court and Covidien shareholders. As consideration for the acquisition, Covidien shareholders will receive $35.19 in cash and 0.956 of a New Medtronic ordinary share for each Covidien share.

In connection with the acquisition, Aviation Merger Sub, LLC (“MergerSub”), a Minnesota limited liability company, will merge with and into Medtronic, with Medtronic as the surviving corporation in the merger. Medtronic shareholders will receive one ordinary share of New Medtronic from or at the direction of MergerSub for each Medtronic share held by them at closing.

Upon completion of such acquisition and merger, based on the number of Medtronic and Covidien shares outstanding as of November 18, 2014, the former shareholders of Medtronic are expected to own approximately 70%, and the former shareholders of Covidien are expected to own approximately 30%, of the outstanding ordinary shares of New Medtronic. The exchange of Medtronic shares for New Medtronic ordinary shares and cash in lieu of fractional shares will be a taxable transaction to Medtronic shareholders. The New Medtronic ordinary shares are expected to be listed on the New York Stock Exchange under the symbol “MDT.” Based on the number of Medtronic and Covidien shares outstanding as of the record date, the total number of New Medtronic ordinary shares that are expected to be issued in connection with the acquisition and the merger is approximately 1.4 billion.

We urge all Medtronic shareholders to read the accompanying joint proxy statement/prospectus, including the Annexes and the documents incorporated by reference in the accompanying joint proxy statement/prospectus, carefully and in their entirety. In particular, we urge you to read carefully “Risk Factors” beginning on page 40 of the accompanying joint proxy statement/prospectus.

Medtronic is holding a special meeting of shareholders to seek your approval to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic. You are also being asked to vote at the special meeting on proposals relating to the creation of “distributable reserves,” which are required under Irish law in order for New Medtronic to, among other things, be able to pay dividends following completion of the transaction, as well as the non-binding, advisory approval of specified compensatory arrangements between Medtronic and its named executive officers relating to the transaction and certain adjournments of the special meeting; however, the acquisition is not conditioned on approval of these proposals.

Your proxy is being solicited by the board of directors of Medtronic. After careful consideration, the Medtronic board of directors has unanimously approved the Transaction Agreement and determined that the entry into the Transaction Agreement and the merger are fair and in the best interest of Medtronic and its shareholders. The Medtronic board of directors recommends unanimously that you vote “FOR” the

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proposal to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic and “FOR” the other proposals described in the accompanying joint proxy statement/prospectus. In considering the recommendation of the board of directors of Medtronic, you should be aware that directors and executive officers of Medtronic have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. See “The Transaction—Interests of Certain Persons in the Transaction—Medtronic.” Your vote is very important. Please vote as soon as possible whether or not you plan to attend the special meeting by following the instructions in the accompanying joint proxy statement/prospectus.

On behalf of the Medtronic board of directors, thank you for your consideration and continued support.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the transaction or determined if the accompanying joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

For the avoidance of doubt, the accompanying joint proxy statement/prospectus is not intended to be and is not a prospectus for the purposes of the Investment Funds, Companies and Miscellaneous Provisions Act of 2005 of Ireland (the “2005 Act”), the Prospectus (Directive 2003/71/EC) Regulations 2005 of Ireland or the Prospectus Rules issued under the 2005 Act, and the Central Bank of Ireland has not approved this document.

The accompanying joint proxy statement/prospectus is dated November 20, 2014, and is first being mailed to shareholders of Medtronic on or about November 21, 2014.

ADDITIONAL INFORMATION

If you have questions about the transaction or the special meeting, or if you need to obtain copies of the accompanying joint proxy statement/prospectus, proxy card or any documents incorporated by reference in the joint proxy statement/prospectus, you may contact the contact listed below. You will not be charged for any of the documents you request.

Georgeson Inc.

480 Washington Blvd., 26th Floor

Jersey City, New Jersey 07310

(866) 257-5415

(781) 575-2137 (International)

Medtronic@Georgeson.com

If you would like to request documents, please do so by December 29, 2014, in order to receive them before the special meeting.

For a more detailed description of the information incorporated by reference in the accompanying joint proxy statement/prospectus and how you may obtain it, see “Where You Can Find More Information” beginning on page 403 of the accompanying joint proxy statement/prospectus.

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MEDTRONIC

Medtronic World Headquarters

Minneapolis, Minnesota 55432

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

 

Time:		8:00 a.m. local time
Date:		January 6, 2015
Place:		Hyatt Regency, 1300 Nicollet Mall, Minneapolis, MN 55403
Purpose:		(1) To adopt the plan of merger contained in the Transaction Agreement, dated as of June 15, 2014, among Medtronic, Covidien plc, Medtronic Holdings Limited (formerly known as Kalani I Limited), referred to in the accompanying joint proxy statement/prospectus as “New Medtronic,” Makani II Limited (“IrSub”), Aviation Acquisition Co., Inc. (“U.S. AcquisitionCo”) and Aviation Merger Sub, LLC (“MergerSub”) and approve the revised memorandum and articles of association of New Medtronic;   (2) To approve the reduction of the share premium account of New Medtronic to allow for the creation of distributable reserves of New Medtronic, which are required under Irish law in order to allow New Medtronic to make distributions and to pay dividends and repurchase or redeem shares following completion of the transaction;   (3) To consider and vote upon, on a non-binding, advisory basis, specified compensatory arrangements between Medtronic and its named executive officers relating to the transaction; and   (4) To approve adjournments of the Medtronic special meeting to another time or place if necessary or appropriate in order (i) to solicit additional proxies if there are insufficient votes at the time of the Medtronic special meeting to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic, (ii) to provide to Medtronic shareholders in advance of the special meeting any supplement or amendment to the joint proxy statement/prospectus or (iii) to disseminate any other information which is material to the Medtronic shareholders voting at the special meeting.   The enclosed joint proxy statement/prospectus describes the purpose and business of the special meeting, contains a detailed description of the merger and the Transaction Agreement and includes a copy of the Transaction Agreement as Annex A and the conditions of the acquisition of Covidien plc and the related scheme of arrangement as Annex B. Please read these documents carefully before deciding how to vote.
Record Date:		The record date for the Medtronic special meeting has been fixed as 5:00 p.m. (Eastern Time in the U.S.) on November 18, 2014. Medtronic shareholders of record at that time are entitled to vote at the Medtronic special meeting.

More information about the transaction and the proposals is contained in the accompanying joint proxy statement/prospectus. We urge all Medtronic shareholders to read the accompanying joint proxy statement/prospectus, including the Annexes and the documents incorporated by reference in the accompanying joint proxy statement/prospectus, carefully and in their entirety. In particular, we urge you to read carefully “Risk Factors” beginning on page 40 of the accompanying joint proxy statement/prospectus.

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The Medtronic board of directors recommends unanimously that Medtronic shareholders vote “FOR” the proposal to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic, “FOR” the proposal to reduce the share premium account of New Medtronic to allow the creation of distributable reserves, “FOR” the approval, on a non-binding, advisory basis, of specified compensatory arrangements between Medtronic and its named executive officers and “FOR” the Medtronic adjournment proposal.

 

By order of the Board of Directors

Bradley E. Lerman

Senior Vice President, General Counsel and Corporate Secretary

November 20, 2014

YOUR VOTE IS IMPORTANT

If you are a record holder, you may vote your shares by using a toll-free telephone number or electronically over the internet as described on the enclosed proxy card. We encourage you to file your proxy using either of these options if they are available to you. Alternatively, you may mark, sign, date and mail your proxy card in the postage-paid envelope provided. If you hold your shares through a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee in order to instruct them how to vote such shares. The method by which you vote does not limit your right to vote in person at the special meeting. We strongly encourage you to vote.

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TABLE OF CONTENTS

 

		Page
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION AND THE SPECIAL MEETINGS			1
SUMMARY			13
Information about the Companies			13
The Transaction			15
Structure of the Transaction			15
Transaction Consideration to Medtronic Shareholders and Scheme Consideration to Covidien Shareholders			16
Treatment of Medtronic Stock Options and Other Medtronic Equity-Based Awards			17
Treatment of Covidien Stock Options and Covidien Share Awards			17
Comparative Per Share Market Price and Dividend Information			18
Recommendation of the Medtronic Board of Directors and Medtronic’s Reasons for the Transaction			18
Opinion of Medtronic’s Financial Advisor			19
Recommendation of the Covidien Board of Directors and Covidien’s Reasons for the Transaction			20
Opinion of Covidien’s Financial Advisor			21
Interests of Certain Persons in the Transaction			22
Other Compensation Matters			24
Board of Directors and Management after the Transaction			24
Material Tax Consequences of the Proposed Transaction			24
Legal Proceedings Regarding the Transaction			26
No Dissenters’ Rights			28
Regulatory Approvals Required			28
Listing of New Medtronic Ordinary Shares on Stock Exchange			29
Conditions to the Completion of the Acquisition and the Merger			29
Termination of the Transaction Agreement			31
Expenses Reimbursement Agreement			32
Financing Relating to the Transaction			32
Transaction-Related Costs			34
Accounting Treatment of the Transaction			34
Comparison of the Rights of Holders of Medtronic Common Shares and New Medtronic Ordinary Shares			34
Comparison of the Rights of Holders of Covidien Ordinary Shares and New Medtronic Ordinary Shares			35
Recent Developments			35
RISK FACTORS			40
Risks Relating to the Transaction			40
Risks Relating to the Businesses of the Combined Company			43
Risks Relating to Medtronic’s Business			52
SELECTED HISTORICAL FINANCIAL DATA OF MEDTRONIC			63

 

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TABLE OF CONTENTS—(continued)

 

		Page
SELECTED HISTORICAL FINANCIAL DATA OF COVIDIEN			64
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA			66
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS			68
PART 1—THE TRANSACTION AND THE SPECIAL MEETINGS			71
THE SPECIAL MEETING OF MEDTRONIC’S SHAREHOLDERS			71
Overview			71
Date, Time and Place of the Medtronic Special Meeting			71
Attendance			71
Proposals			71
Record Date; Outstanding Shares; Shares Entitled to Vote			71
Quorum			72
Vote Required; Recommendation of Medtronic’s Board of Directors			72
Share Ownership and Voting by Medtronic’s Officers and Directors			73
Voting Your Shares			74
Voting Shares Held in Street Name			74
Revoking Your Proxy			75
Costs of Solicitation			75
Other Business			75
Assistance			75
THE SPECIAL MEETINGS OF COVIDIEN’S SHAREHOLDERS			76
Overview			76
Date, Time and Place of the Covidien Special Meetings			76
Attendance			76
Proposals			76
Record Date; Outstanding Ordinary Shares; Ordinary Shares Entitled to Vote			77
Quorum			77
Ordinary Share Ownership and Voting by Covidien’s Directors and Officers			77
Vote Required; Recommendation of Covidien’s Board of Directors			78
Voting Your Ordinary Shares			80
Voting Ordinary Shares Held in Street Name			80
Revoking Your Proxy			80
Costs of Solicitation			81
Other Business			81
Adjournment; Postponement			81
Assistance			81

 

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TABLE OF CONTENTS—(continued)

 

		Page
THE TRANSACTION			82
The Merger and the Acquisition			82
Background of the Transaction			82
Recommendation of the Medtronic Board of Directors and Medtronic’s Reasons for the Transaction			92
Recommendation of the Covidien Board of Directors and Covidien’s Reasons for the Transaction			96
Opinion of Medtronic’s Financial Advisor			99
Opinion of Covidien’s Financial Advisor			110
Medtronic Unaudited Prospective Financial Information			118
Covidien Unaudited Prospective Financial Information			121
Financing			123
Transaction-Related Costs			125
Interests of Certain Persons in the Transaction			125
Quantification of Payments and Benefits to Medtronic’s Named Executive Officers			128
Medtronic’s Intentions Regarding Medtronic and Covidien			134
Board of Directors and Management after the Transaction			136
Compensation of New Medtronic’s Executive Officers			137
Compensation of New Medtronic’s Directors			137
Regulatory Approvals Required			138
Payment of Consideration			139
NO DISSENTERS’ RIGHTS			139
ACCOUNTING TREATMENT OF THE TRANSACTION			139
MATERIAL TAX CONSEQUENCES OF THE PROPOSED TRANSACTION			140
U.S. Federal Income Tax Considerations			140
U.S. Anti-Inversion Rules			141
U.S. Federal Income Tax Treatment of the Proposed Transaction			142
Irish Tax Considerations			150
LISTING OF NEW MEDTRONIC ORDINARY SHARES ON STOCK EXCHANGE			157
DELISTING AND DEREGISTRATION OF MEDTRONIC COMMON SHARES			157
DELISTING AND DEREGISTRATION OF COVIDIEN ORDINARY SHARES			157
LEGAL PROCEEDINGS REGARDING THE TRANSACTION			157
INFORMATION ABOUT THE COMPANIES			159
Medtronic			159
Covidien			159
New Medtronic			159
IrSub			160
U.S. AcquisitionCo			160
MergerSub			160

 

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TABLE OF CONTENTS—(continued)

 

		Page
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			161
MEDTRONIC MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			178
MEDTRONIC’S BUSINESS			221
DIRECTORS OF MEDTRONIC			244
MANAGEMENT OF MEDTRONIC			246
COMPENSATION OF MEDTRONIC’S NON-EMPLOYEE DIRECTORS			248
MEDTRONIC’S COMPENSATION DISCUSSION AND ANALYSIS			251
MEDTRONIC’S 2014 EMPLOYEES STOCK PURCHASE PLAN			290
THE TRANSACTION AGREEMENT			294
Structure of the Transaction			294
Closing of the Transaction			294
Scheme Consideration to Covidien Shareholders			294
Transaction Consideration to Medtronic Shareholders			294
Treatment of Covidien Stock Options and Covidien Share Awards			295
Treatment of Medtronic Options and Other Medtronic Equity Awards			295
Exchange of Covidien Ordinary Shares			296
Exchange of Medtronic Shares			296
Representations and Warranties			296
Covenants and Agreements			299
Conditions to the Completion of the Acquisition and the Merger			308
Survival of Representations and Warranties			310
Termination			310
Expenses			311
Reverse Termination Payment			311
Amendment and Waiver			311
Specific Performance; Third-Party Beneficiaries			312
EXPENSES REIMBURSEMENT AGREEMENT			313
FINANCING RELATING TO THE TRANSACTION			315
CREATION OF DISTRIBUTABLE RESERVES OF NEW MEDTRONIC			317
MEDTRONIC SHAREHOLDER VOTE ON SPECIFIED COMPENSATORY ARRANGEMENTS			318
Advisory Vote on Golden Parachute Compensation			318
Required Vote			318
Recommendation			318
COVIDIEN SHAREHOLDER VOTE ON SPECIFIED COMPENSATORY ARRANGEMENTS			319
Advisory Vote on Golden Parachute Compensation			319
Required Vote			319
Recommendation			319

 

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TABLE OF CONTENTS—(continued)

 

		Page
COMPARATIVE PER SHARE DATA			320
COMPARATIVE PER SHARE MARKET PRICE DATA AND DIVIDEND INFORMATION			322
DESCRIPTION OF NEW MEDTRONIC ORDINARY SHARES			323
Capital Structure			323
Preemption Rights, Share Warrants and Share Options			324
Dividends			325
Share Repurchases, Redemptions and Conversions			326
Lien on Shares, Calls on Shares and Forfeiture of Shares			327
Consolidation and Division; Subdivision			327
Reduction of Share Capital			328
Annual Meetings of Shareholders			328
Extraordinary General Meetings of Shareholders			328
Quorum for General Meetings			329
Voting			329
Variation of Rights Attaching to a Class or Series of Shares			330
Inspection of Books and Records			330
Acquisitions			330
Appraisal Rights			330
Disclosure of Interests in Shares			331
Anti-Takeover Provisions			332
Corporate Governance			335
Legal Name; Formation; Fiscal Year; Registered Office			335
Appointment of Directors			335
Removal of Directors			336
Duration; Dissolution; Rights upon Liquidation			336
Uncertificated Shares			336
Stock Exchange Listing			336
No Sinking Fund			336
No Liability for Further Calls or Assessments			337
Transfer and Registration of Shares			337
COMPARISON OF THE RIGHTS OF HOLDERS OF MEDTRONIC COMMON SHARES AND NEW MEDTRONIC ORDINARY SHARES			338
COMPARISON OF THE RIGHTS OF HOLDERS OF COVIDIEN ORDINARY SHARES AND NEW MEDTRONIC ORDINARY SHARES			370
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND DIRECTORS OF MEDTRONIC			396
LEGAL MATTERS			399

 

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TABLE OF CONTENTS—(continued)

 

		Page
EXPERTS			400
ENFORCEABILITY OF CIVIL LIABILITIES			401
FUTURE SHAREHOLDER PROPOSALS			402
WHERE YOU CAN FIND MORE INFORMATION			403
MEDTRONIC/COVIDIEN S-4—EXCERPTS			406
PART 2—EXPLANATORY STATEMENT			406
Introduction			406
The Acquisition			406
The Conditions			407
Consents and Meetings			408
Structure of Scheme			411
Opinion of Financial Advisor to Covidien			411
Board, Management and Employees			412
Covidien Equity Award Holders			413
The Covidien Directors & Executive Officers and the Effect of the Scheme on Their Interests			413
Taxation			419
Settlement, Listing and Dealings			421
Overseas Shareholders			422
Action to Be Taken			422
Further Information			422
PART 3—THE SCHEME OF ARRANGEMENT			423
PART 4—ADDITIONAL INFORMATION			429
Responsibility			429
Directors and Registered Office			429
Certain Financial Effects of the Scheme			429
Market Quotations			430
Shareholders and Dealings			431
Material Contracts			456
Directors and Service Contracts			463
Material Changes			463
Consents			463
Sources and Bases of Information			464
Concert Parties			465
Other Information			467
Documents Available For Inspection			467
MEDTRONIC PROFIT FORECAST			473
COVIDIEN PROFIT FORECAST			475

 

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TABLE OF CONTENTS—(continued)

 

		Page
MERGER BENEFIT STATEMENT			477
CONSOLIDATED FINANCIAL STATEMENTS OF MEDTRONIC, INC.			F-1
ANNEX A: TRANSACTION AGREEMENT			A-1
ANNEX B: CONDITIONS OF THE ACQUISITION AND THE SCHEME			B-1
ANNEX C: EXPENSES REIMBURSEMENT AGREEMENT			C-1
ANNEX D: FORM OF MEMORANDUM AND ARTICLES OF ASSOCIATION OF NEW MEDTRONIC			D-1
ANNEX E: OPINION OF MEDTRONIC’S FINANCIAL ADVISOR			E-1
ANNEX F: OPINION OF COVIDIEN’S FINANCIAL ADVISOR			F-1
ANNEX G: CONFIRMATION LETTER OF COVIDIEN’S FINANCIAL ADVISOR			G-1
ANNEX H: LIST OF RELEVANT TERRITORIES FOR THE PURPOSES OF IRISH DIVIDEND WITHHOLDING TAX			H-1

 

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QUESTIONS AND ANSWERS ABOUT THE TRANSACTION AND THE SPECIAL MEETINGS

The following questions and answers are intended to address briefly some commonly asked questions regarding the transaction and the special meetings. These questions and answers only highlight some of the information contained in this joint proxy statement/prospectus. They may not contain all the information that is important to you. You should read carefully this entire joint proxy statement/prospectus, including the Annexes and the documents incorporated by reference into this joint proxy statement/prospectus, to understand fully the proposed transactions and the voting procedures for the special meetings. See “Where You Can Find More Information” beginning on page 403. Unless otherwise specified, all references in this joint proxy statement/prospectus to “Medtronic” refer to Medtronic, Inc., a Minnesota corporation; all references in this joint proxy statement/prospectus to “Covidien” refer to Covidien public limited company, a public limited company incorporated in Ireland; all references in this joint proxy statement/prospectus to “New Medtronic” refer to Medtronic Holdings Limited (formerly known as Kalani I Limited), a private limited company incorporated in Ireland that will be re-registered as a public limited company and renamed Medtronic plc at or prior to the completion of the transaction; all references in this joint proxy statement/prospectus to “IrSub” refer to Makani II Limited, a private limited company incorporated in Ireland; all references in this joint proxy statement/prospectus to “U.S. AcquisitionCo” refer to Aviation Acquisition Co., Inc., a Minnesota corporation; all references in this joint proxy statement/prospectus to “MergerSub” refer to Aviation Merger Sub, LLC, a Minnesota limited liability company; all references to the “Transaction Agreement” refer to the Transaction Agreement, dated as of June 15, 2014, by and among Medtronic, Covidien, New Medtronic, IrSub, U.S. AcquisitionCo and MergerSub, a copy of which is included as Annex A to this joint proxy statement/prospectus; all references to the “conditions appendix” refer to the conditions to the acquisition and the scheme, a copy of which is included as Annex B to this joint proxy statement/prospectus; and all references to the “expenses reimbursement agreement” refer to the Expenses Reimbursement Agreement, dated as of June 15, 2014, by and between Medtronic and Covidien, which is included as Annex C to this joint proxy statement/prospectus. Unless otherwise indicated, all references to “dollars” or “$” in this joint proxy statement/prospectus are references to U.S. dollars. If you are in any doubt about this transaction you should consult an independent financial advisor who, if you are taking advice in Ireland, is authorized or exempted by the Investment Intermediaries Act 1995, or the European Communities (Markets in Financial Instruments) Regulations (No’s 1 to 3) 2007 (as amended).

 

Q:	Why am I receiving this joint proxy statement/prospectus?

 

A:

Medtronic, Covidien, New Medtronic, IrSub, U.S. AcquisitionCo and MergerSub have entered into the Transaction Agreement, pursuant to which New Medtronic will acquire Covidien by means of a “scheme of arrangement,” or “scheme,” which is referred to in this joint proxy statement/prospectus as the “acquisition,” and, immediately following and conditioned on the consummation of the acquisition, MergerSub will be merged with and into Medtronic, which is referred to in this joint proxy statement/prospectus as the “merger,” with Medtronic surviving the merger as a wholly owned indirect subsidiary of New Medtronic.

Medtronic is holding a special meeting of shareholders in order to obtain shareholder approval to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic, as described in this joint proxy statement/prospectus.

Covidien is convening a special Court-ordered meeting of its shareholders in order to obtain shareholder approval of the scheme of arrangement, which is referred to herein as the “special Court-ordered meeting.” If Covidien obtains the necessary shareholder approval of the scheme of arrangement at the special Court-ordered meeting, as soon as possible after the conclusion or adjournment of that meeting Covidien will convene an extraordinary general meeting, or the “EGM,” in order to obtain shareholder approval of the resolutions necessary to implement the scheme of arrangement and related resolutions. The Covidien special Court-ordered meeting and the EGM are referred to herein collectively as the Covidien “special meetings.”

 

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We will be unable to complete the merger and the acquisition unless the requisite Medtronic and Covidien shareholder approvals described above are obtained at the respective special meetings. However, as described below, the merger and the acquisition are not conditioned on approval of certain additional matters being presented at the Medtronic special meeting and the Covidien EGM.

The acquisition, the merger and the other transactions contemplated by the Transaction Agreement to occur at completion are referred to collectively in this joint proxy statement/prospectus as the “transaction.”

We have included in this joint proxy statement/prospectus important information about the merger, the acquisition, the Transaction Agreement (a copy of which is attached as Annex A), the conditions appendix (a copy of which is attached as Annex B), the expenses reimbursement agreement (a copy of which is attached as Annex C), the Medtronic special meeting and the Covidien special meetings. You should read this information carefully and in its entirety. If you are a record holder, the enclosed voting materials allow you to vote your shares without attending the applicable special meeting by granting a proxy or voting your shares by mail, telephone or over the internet. If you hold your shares through a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee in order to instruct them how to vote such shares.

 

Q:	When and where will the Medtronic and Covidien special meetings be held?

 

A:	The Medtronic special meeting will be held at the Hyatt Regency, 1300 Nicollet Mall, Minneapolis, MN 55403, on January 6, 2015, at 8:00 a.m., local time.

The Covidien special Court-ordered meeting will be convened at the Conrad Dublin Hotel, Earlsfort Terrace, Dublin 2, Ireland, on January 6, 2015, at 10:00 a.m., local time.

The Covidien EGM will be convened at the Conrad Dublin Hotel, Earlsfort Terrace, Dublin 2, Ireland, on January 6, 2015, at 10:15 a.m., local time or, if later, as soon as possible after the conclusion of the Covidien special Court-ordered meeting.

 

Q:	What will the Medtronic shareholders receive as consideration in the transaction?

 

A:

Upon the effective time of the merger, each Medtronic common share issued and outstanding immediately prior to the merger will be cancelled and will automatically be converted into the right to receive one New Medtronic ordinary share from or at the direction of MergerSub. The one-for-one exchange ratio is fixed, and, as a result, the number of New Medtronic ordinary shares received by the Medtronic shareholders in the transaction will not fluctuate up or down based on the market price of the Medtronic common shares or the Covidien ordinary shares prior to the transaction. It is expected that the New Medtronic ordinary shares will be listed on the New York Stock Exchange (“NYSE”) under the symbol “MDT.” Following the consummation of the transaction, the Medtronic common shares will be delisted from the NYSE.

Since Irish law does not recognize fractional shares held of record, New Medtronic will not issue any fractions of New Medtronic ordinary shares to Medtronic shareholders in the transaction. Instead, the total number of New Medtronic ordinary shares that any Medtronic shareholder would have been entitled to receive will be rounded down to the nearest whole number and all entitlements to fractional New Medtronic ordinary shares will be aggregated and sold by the exchange agent, with any sale proceeds being distributed in cash pro rata to the Medtronic shareholders whose fractional entitlements have been sold.

 

Q:	What will the Covidien shareholders receive as consideration in the transaction?

 

A:

Upon the completion of the transaction, the holder of each Covidien ordinary share issued and outstanding immediately prior to completion of the acquisition (other than certain Covidien ordinary shares to be held by nominees on behalf of New Medtronic and/or IrSub in connection with the transaction) will be entitled to receive (i) $35.19 in cash and (ii) 0.956 of a New Medtronic ordinary share, which, collectively, is referred to in this joint proxy statement/prospectus as the “scheme consideration.” The exchange ratio is fixed, and, as a result, neither the cash amount nor the number of New Medtronic ordinary shares received by the Covidien shareholders in the transaction will fluctuate up or down based on the market price of the Medtronic common shares or the Covidien ordinary shares prior to the transaction.

 

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It is expected that the New Medtronic ordinary shares will be listed on the NYSE under the symbol “MDT.” Following the consummation of the transaction, Covidien ordinary shares will be delisted from the NYSE.

Since Irish law does not recognize fractional shares held of record, New Medtronic will not issue any fractions of New Medtronic ordinary shares to Covidien shareholders in the transaction. Instead, the total number of New Medtronic ordinary shares that any Covidien shareholder would have been entitled to receive will be rounded down to the nearest whole number and all entitlements to fractional New Medtronic ordinary shares will be aggregated and sold by the exchange agent, with any sale proceeds being distributed in cash pro rata to the Covidien shareholders whose fractional entitlements have been sold.

 

Q:	What proposals are being voted on at the Medtronic special meeting and what shareholder vote is required to approve those proposals?

 

A:	(1) Proposal to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic: The affirmative vote of holders of a majority of the Medtronic common shares outstanding on the record date.

Abstentions, failures to vote and broker non-votes will have the same effect as a vote against proposal 1.

(2) Proposal to reduce the share premium account of New Medtronic to allow the creation of distributable reserves: The affirmative vote of holders of a majority of the Medtronic common shares represented, in person or by proxy that authorizes such shares to be voted on such proposal, at the special meeting.

(3) Proposal to consider and vote upon, on a non-binding, advisory basis, specified compensatory arrangements between Medtronic and its named executive officers: The affirmative vote of holders of a majority of the Medtronic common shares represented, in person or by proxy that authorizes such shares to be voted on such proposal, at the special meeting. This proposal is advisory and therefore not binding on the Medtronic board of directors.

(4) Proposal to adjourn the Medtronic special meeting to another time or place if necessary or appropriate (i) to solicit additional proxies if there are insufficient votes at the time of the Medtronic special meeting to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic, (ii) to provide to the Medtronic shareholders in advance of the special meeting any supplement or amendment to the joint proxy statement/prospectus or (iii) to disseminate any other information which is material to the Medtronic shareholders voting at the special meeting, referred to as the “Medtronic adjournment proposal”: The affirmative vote of holders of a majority of the Medtronic common shares represented, in person or by proxy that authorizes such shares to be voted on such proposal, at the special meeting.

With respect to each of proposals 2, 3 and 4, abstentions and failures to vote shares that are represented, in person or by proxy authorized to vote on the particular proposal, at the special meeting will have the same effect as a vote against such proposal. Broker non-votes will have no effect on proposals 2, 3 or 4.

The merger and the acquisition are not conditioned on approval of proposals 2, 3 or 4.

As of the Medtronic record date, directors and executive officers of Medtronic and their affiliates owned and were entitled to vote 424,493 Medtronic common shares, representing approximately 0.04% percent of the Medtronic common shares outstanding on that date. It is expected that the Medtronic directors and executive officers who are shareholders of Medtronic will vote “FOR” the proposal to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic, “FOR” the proposal to create distributable reserves of New Medtronic, “FOR” the proposal to approve, on a non-binding, advisory basis, specified compensatory arrangements between Medtronic and its named executive officers relating to the transaction and “FOR” the Medtronic adjournment proposal, although none of them has entered into any agreement requiring them to do so.

 

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Q:	What proposals are being voted on at the Covidien special meetings and what shareholder vote is required to approve those proposals?

 

A:	Covidien Special Court-Ordered Meeting

Covidien shareholders are being asked to vote on a proposal to approve the scheme at both the Covidien special Court-ordered meeting and at the Covidien EGM. The vote required for such proposal is different at each of the meetings, however. As set out in full under the section entitled “Part 2—Explanatory Statement—Consents and Meetings,” the approval required at the special Court-ordered meeting is a majority in number of the Covidien shareholders of record casting votes on the proposal representing three-fourths (75 percent) or more in value of the Covidien ordinary shares held by such holders, present and voting either in person or by proxy.

Because the vote required to approve the proposal at the Covidien special Court-ordered meeting is based on votes properly cast at the meeting, and because abstentions and broker non-votes are not considered votes properly cast, abstentions and broker non-votes, along with failures to vote, will have no effect on such proposal.

The merger and the acquisition are conditioned on approval of the scheme at the Covidien special Court-ordered meeting.

Covidien Extraordinary General Meeting

Set forth below is a table summarizing certain information with respect to the Resolutions to be voted on at the EGM:

 

EGM Resolution #		Resolution		Ordinary or Special Resolution?		Transaction Conditioned on Approval of Resolution?
1		Approve the scheme of arrangement and authorize the directors of Covidien to take all such actions as they consider necessary or appropriate for carrying the scheme of arrangement into effect.		Ordinary		Yes
2		Approve the cancellation of any Covidien ordinary shares in issue before 10:00 p.m., Irish time, on the day before the Irish High Court hearing to sanction the scheme.		Special		Yes
3		Authorize the directors of Covidien to allot and issue new Covidien shares, fully paid up, to New Medtronic, IrSub and/or their nominee(s) in connection with effecting the scheme.		Ordinary		Yes
4		Amend the articles of association of Covidien so that any ordinary shares of Covidien that are issued at or after 10:00 p.m., Irish time, on the last business day before the scheme becomes effective are acquired by New Medtronic, IrSub and/or their nominee(s) for the scheme consideration.		Special		Yes
5		Approve the reduction of the share premium account of New Medtronic resulting from (i) the issuance of New Medtronic shares pursuant to the scheme and (ii) a subscription for New Medtronic shares by MergerSub prior to the merger, in order to create distributable reserves of New Medtronic.		Ordinary		No
6		Approve, on a non-binding, advisory basis, specified compensatory arrangements between Covidien and its named executive officers relating to the transaction.		Ordinary		No

By way of further explanation:

 

•

EGM resolution 2 is required because under Irish law a reduction of share capital (including a cancellation of shares as part of a scheme of arrangement that will occur as part of the transaction) requires prior authorization of shareholders by way of a special resolution;

 

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•

EGM resolution 3 is required because, under Irish law, Covidien’s directors must have sufficient authority from shareholders to implement the issuance of new Covidien shares to New Medtronic, IrSub and/or their nominees, as will occur as part of the transaction; and

 

•

EGM resolution 4 is required because the scheme of arrangement applies to all ordinary shares of Covidien in issue before 10:00 p.m., Irish time, on the last business day before the scheme of arrangement becomes effective. In the event that Covidien issues ordinary shares to any person (other than New Medtronic, IrSub or their nominee(s)) after this time, for example pursuant to the exercise of share awards or options, the amendment to Covidien’s articles of association effected by this resolution will ensure that such ordinary shares are effectively subject to the scheme of arrangement.

At the Covidien EGM, the requisite approval of each of the EGM resolutions depends on whether it is an “ordinary resolution” (EGM resolutions 1, 3, 5 and 6), which requires the approval of the holders of at least a majority of the votes cast by the holders of Covidien ordinary shares present and voting, either in person or by proxy, or a “special resolution” (EGM resolutions 2 and 4), which requires the approval of the holders of at least 75 percent of the votes cast by the holders of Covidien ordinary shares present and voting, either in person or by proxy.

For all the EGM resolutions, because the votes required to approve such resolutions are based on votes properly cast at the meeting, and because abstentions and broker non-votes are not considered votes properly cast, abstentions and broker non-votes, along with failures to vote, will have no effect on the EGM resolutions.

As of the Covidien record date, the Covidien directors and executive officers had the right to vote approximately 0.19% of the Covidien ordinary shares then outstanding and entitled to vote at the special Court-ordered meeting and the EGM. It is expected that Covidien’s directors and executive officers will vote “FOR” each of the proposals at the special Court-ordered meeting and at the EGM, although none of them have entered into any agreement requiring them to do so.

 

Q:	Why are there two Covidien special meetings?

 

A:

Irish law requires that two separate shareholder meetings be held, the special Court-ordered meeting and the EGM. Both meetings are necessary to cause the scheme of arrangement to become effective. At the special Court-ordered meeting, Covidien shareholders as of 5:00 p.m. (Eastern time in the U.S.) on November 18, 2014, the Covidien record date, will be asked to approve the scheme. At the EGM, those Covidien shareholders will also be asked to approve the scheme and related matters. For more detail on these matters, see “The Special Meetings of Covidien’s Shareholders.”

 

Q:	What constitutes a quorum?

 

A:

Medtronic: A majority of the outstanding Medtronic common shares, present in person or by proxy authorized to vote at the special meeting, will constitute a quorum for the transaction of business at the Medtronic special meeting. Medtronic’s inspector of election intends to treat as “present” for these purposes shareholders who have submitted properly executed or transmitted proxies that are marked “abstain.” The inspector will also treat as “present” shares held in “street name” by brokers that are voted on at least one proposal to come before the meeting.

Covidien: The holders of Covidien ordinary shares outstanding, present in person or by proxy, entitling them to exercise a majority of the voting power of Covidien on the Covidien record date will constitute a quorum for a meeting. Covidien’s inspector of election intends to treat as “present” for these purposes shareholders who have submitted properly executed or transmitted proxies that are marked “abstain.” The inspector will also treat as “present” shares held in “street name” by brokers that are voted on at least one proposal to come before the meeting.

 

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Q:	Why am I being asked to approve the distributable reserves proposal?

 

A:

Under Irish law, dividends may be paid (and share repurchases and redemptions must generally be funded) only out of “distributable reserves,” which New Medtronic will not have immediately following the completion of the transaction. Distributable reserves generally means accumulated realized profits less accumulated realized losses and includes reserves created by way of capital reduction. Please see “Creation of Distributable Reserves of New Medtronic” beginning on page 317. Shareholders of Medtronic and Covidien are therefore being asked at their respective special meetings to approve the creation of distributable reserves of New Medtronic (through the reduction of the share premium account of New Medtronic) in order to facilitate New Medtronic’s ability to pay dividends (and repurchase or redeem shares) after the transaction.

The approval of the distributable reserves proposal is not a condition to the consummation of the transaction. Accordingly, if shareholders of Medtronic approve the proposal to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum of articles of association of New Medtronic, and shareholders of Covidien approve the scheme and resolutions 1, 2, 3 and 4 to be proposed at the EGM, but shareholders of Medtronic and/or Covidien do not approve the distributable reserves proposal, and the transaction is consummated, New Medtronic may not have sufficient distributable reserves to pay dividends (or to repurchase or redeem shares) following the transaction unless and until New Medtronic otherwise accumulates distributable reserves. In addition, the creation of distributable reserves of New Medtronic requires the approval of the Irish High Court. Although New Medtronic is not aware of any reason why the Irish High Court would not approve the creation of distributable reserves, the issuance of the required order is a matter for the discretion of the Irish High Court. Please see “Risk Factors” beginning on page 40 and “Creation of Distributable Reserves of New Medtronic” beginning on page 317.

 

Q:	What are the recommendations of the Medtronic and Covidien boards of directors regarding the proposals being put to a vote at their respective special meetings?

 

A:	Medtronic: The Medtronic board of directors has unanimously approved the Transaction Agreement and determined that the entry into the Transaction Agreement and the merger are fair to and in the best interests of Medtronic and its shareholders.

The Medtronic board of directors unanimously recommends that Medtronic shareholders vote:

 

•

“FOR” the proposal to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic;

 

•

“FOR” the proposal to reduce the share premium account of New Medtronic to allow the creation of distributable reserves;

 

•

“FOR” the approval, on a non-binding, advisory basis, of specified compensatory arrangements between Medtronic and its named executive officers; and

 

•

“FOR” the Medtronic adjournment proposal.

See “The Transaction—Recommendation of the Medtronic Board of Directors and Medtronic’s Reasons for the Transaction” beginning on page 92.

In considering the recommendation of the Medtronic board of directors, you should be aware that directors and executive officers of Medtronic have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. See “The Transaction—Interests of Certain Persons in the Transaction—Medtronic.”

Covidien: The Covidien board of directors has unanimously approved the Transaction Agreement and determined that the Transaction Agreement and the transactions contemplated by the Transaction Agreement, including the scheme, are fair to and in the best interests of Covidien and its shareholders and that the terms of the scheme are fair and reasonable.

 

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The Covidien board of directors unanimously recommends that Covidien shareholders vote:

 

•

“FOR” the scheme of arrangement at the special Court-ordered meeting;

 

•

“FOR” the scheme of arrangement at the EGM;

 

•

“FOR” the cancellation of any Covidien ordinary shares in issue before 10:00 p.m., Irish time, on the day before the Irish High Court hearing to sanction the scheme;

 

•

“FOR” the authorization of the directors of Covidien to allot and issue new Covidien shares, fully paid up, to New Medtronic and IrSub in connection with effecting the scheme;

 

•

“FOR” amendment of the articles of association of Covidien so that any ordinary shares of Covidien that are issued at or after 10:00 p.m., Irish time on the last business day before the scheme becomes effective are acquired by New Medtronic and/or IrSub for the scheme consideration;

 

•

“FOR” the reduction of the share premium account of New Medtronic resulting from (i) the issuance of New Medtronic shares pursuant to the scheme and (ii) a subscription for New Medtronic shares by MergerSub prior to the merger, in order to create distributable reserves of New Medtronic; and

 

•

“FOR” the approval, on a non-binding, advisory basis of specified compensatory arrangements between Covidien and its named executive officers.

See “The Transaction—Recommendation of the Covidien Board of Directors and Covidien’s Reasons for the Transaction” beginning on page 96.

In considering the recommendation of the Covidien board of directors, you should be aware that directors and executive officers of Covidien have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. See “The Transaction—Interests of Certain Persons in the Transaction—Covidien.”

 

Q:	When is the transaction expected to be completed?

 

A:

As of the date of this joint proxy statement/prospectus, the transaction is expected to be completed in early 2015. However, no assurance can be provided as to when or if the transaction will be completed. The required vote of Medtronic and Covidien shareholders to adopt the required shareholder proposals at their respective special meetings, as well as the necessary regulatory consents and approvals, must first be obtained and other conditions specified in the conditions appendix must be satisfied or, to the extent applicable, waived.

 

Q:	Why will the place of incorporation of New Medtronic be Ireland?

 

A:	Medtronic decided that New Medtronic would be incorporated in Ireland for the following reasons:

 

•

Incorporating New Medtronic in Ireland will result in significantly enhanced global cash management flexibility, including access to Covidien’s non-U.S. cash flow without negative tax effects, compared to incorporation in the United States.

 

•

This enhanced flexibility includes access to cash generated by Covidien’s non-U.S. subsidiaries, which will continue to be free of U.S. tax so long as New Medtronic is not taxed as a U.S. corporation, and an expected reduction of the combined effective tax rate of New Medtronic by approximately two percentage points compared with the companies’ estimated blended rates. See “Future potential changes to the tax laws could result in New Medtronic being treated as a U.S. corporation for U.S. federal tax purposes, and if adopted prior to closing, could jeopardize or delay the consummation of the transaction” beginning on page 45.

 

•

While New Medtronic is expected to have enhanced global cash management flexibility as a result of the transaction, it is not possible to quantify the financial impact of such enhanced flexibility,

 

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because the potential financial impact depends on a number of factors that are not yet known, including the amounts of future non-U.S. cash flows from Covidien’s business, the uses of such amounts and the potential return on any investment resulting from such amounts.

 

•

As of June 27, 2014, approximately $1.228 billion of cash and cash equivalents were held by Covidien’s subsidiaries, substantially all of which can be repatriated under current laws. Covidien’s non-U.S. income from continuing operations before income taxes was $1.496 billion for the year ended September 27, 2013.

 

•

Covidien is already an Irish-domiciled company, and over time has built productive relationships with the relevant Irish regulatory authorities and the Irish government generally. Both Medtronic and Covidien have substantial operations in Ireland and an infrastructure to provide the necessary support for the parent company;

 

•

Ireland is a beneficial location considering Medtronic’s and Covidien’s presence in markets outside the United States, particularly in Europe; and

 

•

Ireland enjoys strong relationships as a member of the European Union, and has a long history of international investment and a good network of commercial, tax, and other treaties with the United States, the European Union and many other countries where both Medtronic and Covidien have major operations.

 

Q:	Who is entitled to vote?

 

A:

Medtronic: The board of directors of Medtronic has fixed 5:00 p.m. (Eastern Time in the U.S.) on November 18, 2014 as the Medtronic record date. If you were a Medtronic shareholder of record as of 5:00 p.m. (Eastern Time in the U.S.) on November 18, 2014, you are entitled to receive notice of and to vote at the Medtronic special meeting and any adjournments thereof.

Covidien: The board of directors of Covidien has fixed 5:00 p.m. (Eastern Time in the U.S.) on November 18, 2014 as the Covidien record date. If you were a Covidien shareholder of record as of 5:00 p.m. (Eastern Time in the U.S.) on November 18, 2014, you are entitled to receive notice of and to vote at the Covidien special meetings and any adjournments thereof.

 

Q:	What if I sell my Medtronic common shares before the Medtronic special meeting or my Covidien ordinary shares before the Covidien special meetings?

Medtronic: If you transfer your shares after the Medtronic record date but before the Medtronic special meeting, you will retain your right to vote at the Medtronic special meeting, but will have transferred the right to receive New Medtronic ordinary shares pursuant to the transaction. In order to receive the New Medtronic ordinary shares, you must hold your shares through completion of the transaction.

Covidien: If you transfer your shares after the Covidien record date but before the Covidien special meetings, you will retain your right to vote at the Covidien special meetings, but will have transferred the right to receive the scheme consideration. In order to receive the scheme consideration, you must hold your shares through completion of the transaction.

 

Q:	How do I vote?

 

A:	Medtronic: If you are a Medtronic shareholder of record, you may vote your shares at the Medtronic special meeting in one of the following ways:

 

•

by mailing your completed and signed proxy card in the enclosed return envelope;

 

•

by voting by telephone or over the internet as instructed on the enclosed proxy card; or

 

•

by attending the Medtronic special meeting and voting in person.

 

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To vote in person, you must request an admission ticket in advance by visiting www.proxyvote.com and following the instructions provided (you will need the 12 digit number included on your proxy card, voter instruction form or notice). Tickets will be issued to registered and beneficial owners and to one guest accompanying each registered or beneficial owner. Requests for admission tickets will be processed in the order in which they are received and must be requested no later than 11:59 p.m. (Eastern Time in the U.S.) on January 5, 2015. Please note that seating is limited and requests for tickets will be accepted on a first-come, first-served basis. On the day of the meeting, each shareholder will be required to present proof of ownership as of the Medtronic record date and valid picture identification. Cameras (including cell phones with photographic capabilities), recording devices and other electronic devices will not be permitted at the meeting. You will be required to enter through a security check point before being granted access to the meeting.

 

•

If you are a Medtronic shareholder of record, the shares listed on your proxy card will include the following shares, if applicable:

 

•

shares held in the Medtronic, Inc. SIP;

 

•

shares held in the Medtronic Puerto Rico Employees’ SIP; and

 

•

shares held in a book-entry account at Wells Fargo Bank N.A., Medtronic’s transfer agent.

If you hold your shares through a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee in order to instruct them how to vote such shares.

Covidien: If you are a Covidien shareholder of record, you may vote your shares at the Covidien special meetings in one of the following ways:

 

•

by mailing your applicable completed and signed proxy cards in the enclosed return envelope;

 

•

by voting by telephone or over the internet as instructed on the applicable enclosed proxy card; or

 

•

by attending the applicable Covidien special meeting and voting in person.

To vote in person, you must bring proof of ownership as of the Covidien record date and valid picture identification.

 

•

If you are a Covidien shareholder of record, the shares listed on your proxy cards will include the following shares, if applicable:

 

•

shares issued under the Covidien Savings Related Share Plan; and

 

•

shares held in a book-entry account at Computershare Trust Company, N.A., Covidien’s transfer agent.

If you hold your shares through a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee in order to instruct them how to vote such shares.

 

Q:	How do I vote shares acquired through an employee program?

 

A:	Medtronic: If you are a Medtronic shareholder of record, the shares listed on your proxy card will include the following shares, if applicable:

 

•

shares held in the Medtronic, Inc. SIP;

 

•

shares held in the Medtronic Puerto Rico Employees’ SIP; and

 

•

shares held in a certificate form or in a book-entry account at Wells Fargo Bank N.A., Medtronic’s transfer agent.

Please see the Q&A above for “How do I vote?” with respect to such shares.

If you hold your shares through Charles Schwab, UBS or another bank, broker or nominee, you will receive a separate voting instruction form and should follow the instructions provided by your bank, broker or nominee in order to instruct them how to vote such shares.

 

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Covidien: If you are a Covidien shareholder of record, the shares listed in your proxy card will include the following shares, if applicable:

 

•

shares issued under the Covidien Savings Related Share Plan; and

 

•

shares held in a book-entry account at Computershare Trust Company, N.A., Covidien’s transfer agent (including shares you may have transferred from UBS or Fidelity).

Please see the Q&A above for “How do I vote?” with respect to such shares.

If you hold your shares through UBS, Fidelity or another bank, broker or nominee, you will receive a separate voting instruction form and should follow the instructions provided by your bank, broker or nominee in order to instruct them how to vote such shares.

 

Q:	If my shares are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee automatically vote my shares for me?

 

A:

No. Your bank, broker or other nominee will not vote your shares if you do not provide your bank, broker or other nominee with a signed voting instruction form with respect to your shares, such failure to vote being referred to as a “broker non-vote.” Therefore, you should instruct your bank, broker or other nominee to vote your shares by following the directions your bank, broker or other nominee provides.

Brokers do not have discretionary authority to vote on any of the Medtronic proposals or on any of the Covidien proposals.

Please see “The Special Meeting of Medtronic’s Shareholders—Voting Shares Held in Street Name” beginning on page 74 and “The Special Meetings of Covidien’s Shareholders—Voting Ordinary Shares Held in Street Name” beginning on page 80.

 

Q:	How many votes do I have?

 

A:

Medtronic: You are entitled to one vote for each Medtronic common share that you owned as of 5:00 p.m. (Eastern Time in the U.S.) on the Medtronic record date. As of 5:00 p.m. (Eastern Time in the U.S.) on the Medtronic record date, 983,545,016 Medtronic common shares were outstanding and entitled to vote at the special meeting.

Covidien: You are entitled to one vote for each Covidien ordinary share that you owned as of 5:00 p.m. (Eastern Time in the U.S.) on the Covidien record date. As of 5:00 p.m. (Eastern Time in the U.S.) on the Covidien record date, 452,731,347 Covidien ordinary shares were outstanding and entitled to vote at the special Court-ordered meeting and at the EGM.

 

Q:	What if I hold shares in both Medtronic and Covidien?

 

A:

If you are a shareholder of both Medtronic and Covidien, you will receive two separate packages of proxy materials. A vote as a Medtronic shareholder on the proposal to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic or any of the other proposals at the Medtronic special meeting will not constitute a vote as a Covidien shareholder on the proposal to approve the scheme of arrangement or any of the other proposals at the Covidien special Court-ordered meeting or EGM, or vice versa. THEREFORE, IF YOU ARE A RECORD HOLDER, PLEASE MARK, SIGN, DATE AND RETURN ALL PROXY CARDS THAT YOU RECEIVE, WHETHER FROM MEDTRONIC OR COVIDIEN, OR SUBMIT A SEPARATE PROXY AS BOTH A MEDTRONIC AND A COVIDIEN SHAREHOLDER FOR EACH SPECIAL MEETING, OVER THE INTERNET OR BY TELEPHONE. IF YOU HOLD YOUR SHARES THROUGH A BANK, BROKER OR OTHER NOMINEE, YOU SHOULD FOLLOW THE INSTRUCTIONS PROVIDED BY YOUR BANK, BROKER OR OTHER NOMINEE IN ORDER TO INSTRUCT THEM ON HOW TO VOTE SUCH SHARES AS BOTH A MEDTRONIC AND A COVIDIEN SHAREHOLDER FOR EACH APPLICABLE SPECIAL MEETING.

 

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Q:	Should I send in my stock certificates now?

 

A:

No. Medtronic shareholders that hold shares in certificated form should keep their existing stock certificates at this time. After the transaction is completed, you will receive written instructions for exchanging your stock certificates for New Medtronic ordinary shares and other consideration, if applicable.

 

Q:	What do I need to do now?

 

A:

If you are entitled to vote at a special meeting of your company’s shareholders, you can vote in person by completing a ballot at the special meeting, or you can vote by proxy before the special meeting. Even if you plan to attend your company’s special meeting, we encourage you to vote by proxy before the special meeting. After carefully reading and considering the information contained in this joint proxy statement/prospectus, including the Annexes and the documents incorporated by reference, please submit your proxy by telephone or internet in accordance with the instructions set forth on the relevant enclosed proxy card, or mark, sign and date the relevant proxy card, and return it in the enclosed prepaid envelope as soon as possible so that your shares may be voted at your company’s relevant special meeting. Your proxy card or your telephone or internet directions will instruct the persons identified as your proxy to vote your shares at your company’s relevant special meeting as directed by you.

If you are a shareholder of record and you sign and send in a proxy card but do not indicate how you want to vote, your proxy will be voted “FOR” each of the proposals.

If you hold your Medtronic common shares or Covidien ordinary shares through a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee when instructing them how to vote your Medtronic common shares or Covidien ordinary shares.

 

Q:	May I change my vote after I have mailed my signed proxy card or voted by telephone or over the internet?

 

A:	Yes, you may change your vote at any time before your proxy is voted at the Medtronic special meeting or at the Covidien special Court-ordered meeting or the Covidien EGM. You can do this in one of four ways:

 

•

timely deliver a valid later-dated proxy by mail;

 

•

before the relevant special meeting, provide written notice that you have revoked your proxy to the secretary of Medtronic or Covidien, as applicable, so that it is received prior to midnight on the night before the relevant special meeting at the following address:

Medtronic, Inc.

710 Medtronic Parkway

Minneapolis, Minnesota 55432

Attention: Bradley E. Lerman, Corporate Secretary

Covidien public limited company

c/o Covidien

15 Hampshire Street

Mansfield, Massachusetts 02048

Attention: John W. Kapples, Secretary

 

•

submit revised voting instructions by telephone or over the internet by following the instructions set forth on the proxy card; or

 

•

attend the applicable special meeting and vote in person. Simply attending the meeting, however, will not revoke your proxy or change your voting instructions; you must vote by ballot at the meeting to change your vote.

If you have instructed a bank, broker or other nominee to vote your shares, you must follow directions received from your bank, broker or other nominee to change your vote or revoke your proxy.

 

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Q:	Who can help answer my questions?

 

A:

If you have questions about the transaction, or if you need assistance in submitting your proxy or voting your shares or need additional copies of this joint proxy statement/prospectus or the enclosed proxy card(s), you should contact the proxy solicitation agent for the company in which you hold shares.

If you are a Medtronic shareholder, you should contact Georgeson Inc., the proxy solicitation agent for Medtronic, by mail at 480 Washington Blvd., 26^th Floor, Jersey City, NJ 07310, by telephone at (866) 257-5415 (toll free) or (781) 575-2137 (International) or by e-mail at Medtronic@Georgeson.com. If you are a Covidien shareholder, you should contact D.F. King & Co., Inc., the proxy solicitation agent for Covidien, by mail at 48 Wall Street, 22^nd Floor, New York, NY 10005, by telephone at (800) 488-8035 (toll free in the U.S. and Canada) or (212) 269-5550 (collect), or by e-mail at covidien@dfking.com.

If your shares are held by a broker, bank or other nominee, you should contact your broker, bank or other nominee for additional information.

 

Q:	Where can I find more information about Medtronic and Covidien?

 

A:	You can find more information about Medtronic and Covidien from various sources described under “Where You Can Find More Information” beginning on page 403.

 

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RISK FACTORS

In addition to the other information contained in or incorporated by reference into this joint proxy statement/prospectus, you should consider carefully the following risk factors, including the matters addressed under the caption “Cautionary Statement Regarding Forward-Looking Statements.” You should also read and consider the risks associated with the business of Medtronic and the risks associated with the business of Covidien because these risks will also affect New Medtronic. The risks associated with the business of Medtronic can be found below in the section entitled “Risk Factors—Risks Relating to Medtronic’s Business.” The risks associated with the business of Covidien can be found in the Covidien Annual Report on Form 10-K for the fiscal year ended September 27, 2013, which is incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information.”

Risks Relating to the Transaction

The number of New Medtronic ordinary shares that New Medtronic will issue to Covidien shareholders as a result of the acquisition will be based on a fixed exchange ratio. The value of each New Medtronic ordinary share that New Medtronic will issue to Covidien shareholders as a result of the acquisition could be different than at the time Covidien shareholders vote to approve the scheme and Medtronic shareholders vote to adopt the plan of merger contained in the Transaction Agreement.

Upon completion of the transaction, Covidien ordinary shareholders (other than shareholders with respect to certain Covidien ordinary shares to be held by nominees on behalf of New Medtronic and/or IrSub in connection with the transaction) will receive (i) $35.19 in cash and (ii) 0.956 of a New Medtronic ordinary share for each Covidien ordinary share they hold. The number of New Medtronic ordinary shares that New Medtronic will issue to Covidien shareholders as a result of the acquisition will not be adjusted in the event of any increase or decrease in the share price of either Medtronic common shares or Covidien ordinary shares between the time the Covidien shareholders vote to approve the scheme and the completion time of the transaction or between the time Medtronic shareholders vote to adopt the plan of merger contained in the Transaction Agreement and the completion time of the transaction.

The market value of each New Medtronic ordinary share that New Medtronic will issue to Covidien shareholders as a result of the acquisition could vary significantly from the market value of Medtronic common shares on the date of this joint proxy statement/prospectus or the date of the Covidien special meetings. Because the exchange ratio will not be adjusted to reflect any changes in the market value of Medtronic common shares or Covidien ordinary shares, such market price fluctuations may affect the value that Covidien shareholders will receive upon completion of the transaction. Share price changes may result from a variety of factors, including changes in the business, operations or prospects of Medtronic or Covidien, market assessments of the likelihood that the transaction will be completed, the timing of the transaction, regulatory considerations, general market and economic conditions and other factors. Shareholders are urged to obtain current market quotations for Medtronic common shares and Covidien ordinary shares. See the section entitled “Comparative Per Share Market Price Data and Dividend Information” beginning on page 322 for additional information on the market value of Medtronic common shares and Covidien ordinary shares.

Medtronic and Covidien must obtain certain approvals and governmental and regulatory consents to consummate the transaction, which, if delayed, not granted or granted with unacceptable conditions, may jeopardize or delay the consummation of the acquisition or the merger, result in additional expenditures of money and resources and/or reduce the anticipated benefits of the transaction.

The merger and the acquisition are subject to customary closing conditions. These closing conditions include, among others, the receipt of required approvals of Medtronic and Covidien shareholders, the effectiveness of the registration statement of which this joint proxy statement/prospectus forms a part, the approval of the scheme of arrangement by the Irish High Court and the expiration or termination of the waiting

 

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period under the HSR Act, and the relevant clearances under the antitrust, competition and foreign investment laws of the European Commission, Canada, China, Israel, Japan, Russia, South Korea and Turkey under which filings or clearances are or may be required.

The governmental agencies from which the parties will seek certain of these clearances have broad discretion in administering the governing regulations. As a condition to their clearance of the merger and the acquisition, agencies may impose requirements, limitations or costs or require divestitures or place restrictions on the conduct of New Medtronic’s business after the closing. The companies assessed these requirements and agreed to divest Covidien’s DCB assets in the Divestiture Transaction in order to obtain clearance under the HSR Act. See “Regulatory Approvals Required—United States Antitrust.” The Divestiture Transaction and any other such divestiture would take place after the closing. As a result of the Divestiture Transaction, Covidien has recorded a pre-tax impairment charge of $94 million in its fourth quarter results. These requirements, limitations, costs, divestitures or restrictions could jeopardize or delay the consummation of the transaction or may reduce the anticipated benefits of the transaction. Further, no assurance can be given that the required shareholder approvals will be obtained or that the required closing conditions will be satisfied, and, if all required consents and approvals are obtained and the closing conditions are satisfied, no assurance can be given as to the terms, conditions and timing of the approvals. If Medtronic and Covidien agree to any material requirements, limitations, costs, divestitures or restrictions in order to obtain any approvals required to consummate the merger or the acquisition, these requirements, limitations, costs, divestitures or restrictions could adversely affect New Medtronic’s ability to integrate Medtronic’s operations with Covidien’s operations or reduce the anticipated benefits of the transaction. This could result in a failure to consummate the transaction or have a material adverse effect on New Medtronic’s business and results of operations.

The Transaction Agreement and the expenses reimbursement agreement together contain provisions that limit Covidien’s ability to pursue alternatives to the transaction and, in specified circumstances, could require Covidien to reimburse certain of Medtronic’s expenses.

Under the Transaction Agreement, Covidien is restricted, subject to certain exceptions, from soliciting, knowingly encouraging or negotiating, or furnishing information with regard to, any inquiry, proposal or offer for a competing acquisition proposal with any person. Covidien may terminate the Transaction Agreement and enter into an agreement with respect to a superior proposal only if specified conditions have been satisfied, including a determination by the Covidien board of directors (after consultation with Covidien’s financial advisor and legal counsel) that such proposal is more favorable to the Covidien shareholders than the transaction, and such a termination would result in Covidien being required to reimburse certain of Medtronic’s expenses under the expenses reimbursement agreement. These provisions could discourage a third party that may have an interest in acquiring all or a significant part of Covidien from considering or proposing that acquisition, even if such third party were prepared to pay consideration with a higher value than the value of the scheme consideration.

Failure to consummate the transaction could negatively impact the share price and the future business and financial results of Medtronic and/or Covidien.

If the transaction is not consummated, the ongoing businesses of Medtronic and/or Covidien may be adversely affected and, without realizing any of the potential benefits of having consummated the transaction, Medtronic and/or Covidien will be subject to a number of risks, including the following:

 

•

Medtronic and/or Covidien will be required to pay certain costs and expenses relating to the proposed transaction;

 

•

if the Transaction Agreement is terminated under specified circumstances, Covidien may be obligated to reimburse certain expenses of Medtronic, in an amount up to approximately $429 million;

 

•

if the Transaction Agreement is terminated under specified circumstances, Medtronic may be required to pay to Covidien a termination fee equal to $850 million;

 

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•

matters relating to the transaction (including integration planning) may require substantial commitments of time and resources by Medtronic management and Covidien management, which could otherwise have been devoted to other opportunities that may have been beneficial to Medtronic or Covidien, as the case may be;

 

•

the Transaction Agreement restricts Medtronic and Covidien, without the other party’s consent and subject to certain exceptions, from making certain acquisitions and taking other specified actions until the merger and the acquisition occur or the Transaction Agreement terminates. These restrictions may prevent Medtronic and Covidien from pursuing otherwise attractive business opportunities and making other changes to their businesses that may arise prior to completion of the merger and the acquisition or termination of the Transaction Agreement; and

 

•

Medtronic or Covidien also could be subject to litigation related to any failure to consummate the transaction or related to any enforcement proceeding commenced against Medtronic or Covidien to perform their respective obligations under the Transaction Agreement.

If the transaction is not consummated, these risks may materialize and may adversely affect Medtronic’s or Covidien’s business, financial results and share price.

Medtronic’s and Covidien’s directors and executive officers have interests in the transaction that are in addition to, or different from, any interests they might have as shareholders.

In considering the recommendations of the Medtronic and Covidien boards of directors, Medtronic and Covidien shareholders should be aware that directors and executive officers of Medtronic and Covidien, respectively, have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders, the aggregate values of which we estimate to be approximately $69 million for Medtronic’s directors and executive officers (consisting of the expected gross-up payment in respect of the excise tax) and approximately $151 million for Covidien’s directors and executive officers (exclusive of any applicable excise tax gross-up). The cost to Medtronic of providing a gross-up payment for Medtronic’s and Covidien’s directors and officers in respect of the excise tax is expected to be approximately $72 million (including the $69 million for Medtronic’s directors and officers described above), see “The Transaction—Interests of Certain Persons in the Transaction—Medtronic—Excise Tax Gross-Up.” For more information, including the assumptions used to estimate the value of such interests, please see “The Transaction—Interests of Certain Persons in the Transaction” beginning on page 125. You should consider these interests in connection with your vote on the related proposals.

The Transaction Agreement contains provisions that limit Medtronic’s ability to pursue alternatives to the transaction and, in specified circumstances, could require Medtronic to pay a termination fee to Covidien.

Under the Transaction Agreement, Medtronic is restricted, subject to certain exceptions, from soliciting, knowingly encouraging or negotiating, or furnishing information with regard to, any inquiry, proposal or offer for a competing acquisition proposal with any person. In addition, Medtronic may not terminate the Transaction Agreement to enter into any agreement with respect to a superior proposal. In the event that the Medtronic board of directors changes its recommendation that Medtronic’s shareholders adopt the plan of merger contained in the Transaction Agreement and Medtronic’s shareholders do not, at the Medtronic special meeting, vote to adopt the plan of merger contained in the Transaction Agreement, Medtronic could be required to pay Covidien a termination fee of $850 million if certain other conditions are satisfied. These provisions may have the effect of increasing the cost to Medtronic if the Medtronic board of directors changes its recommendation that Medtronic’s shareholders adopt the plan of merger contained in the Transaction Agreement and these provisions could also discourage a third party that may have an interest in acquiring all or a significant part of Medtronic from considering or proposing that acquisition, even if such third party were willing to pay consideration with a higher value than the merger consideration.

 

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While the transaction is pending, Medtronic and Covidien will be subject to business uncertainties that could adversely affect their businesses.

Uncertainty about the effect of the transaction on employees, customers and suppliers may have an adverse effect on Medtronic and Covidien and, consequently, on New Medtronic. These uncertainties may impair Medtronic’s and Covidien’s ability to attract, retain and motivate key personnel until the merger and the acquisition are consummated and for a period of time thereafter, and could cause customers, suppliers and others who deal with Medtronic and Covidien to seek to change or terminate existing business relationships with Medtronic and Covidien. Employee retention may be particularly challenging during the pendency of the transaction because employees may experience uncertainty about their future roles with New Medtronic. If, despite Medtronic’s and Covidien’s retention efforts, key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with New Medtronic, New Medtronic’s business could be seriously harmed.

Risks Relating to the Businesses of the Combined Company

We may not realize all of the anticipated benefits of the transaction or those benefits may take longer to realize than expected. We may also encounter significant unexpected difficulties in integrating the two businesses.

Our ability to realize the anticipated benefits of the transaction will depend, to a large extent, on our ability to integrate the Medtronic and Covidien businesses. The combination of two independent businesses is a complex, costly and time-consuming process. As a result, we will be required to devote significant management attention and resources to integrating the business practices and operations of Medtronic and Covidien. The integration process may disrupt the businesses and, if implemented ineffectively or if impacted by unforeseen negative economic or market conditions or other factors, we may not realize the full anticipated benefits of the transaction. Our failure to meet the challenges involved in integrating the two businesses to realize the anticipated benefits of the transaction could cause an interruption of, or a loss of momentum in, the activities of New Medtronic and could adversely affect New Medtronic’s results of operations.

In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customer relationships, and diversion of management’s attention. The difficulties of combining the operations of the companies include, among others:

 

•

the diversion of management’s attention to integration matters;

 

•

difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from combining the business of Covidien with that of Medtronic;

 

•

difficulties in the integration of operations and systems;

 

•

difficulties in the assimilation of employees;

 

•

difficulties in managing the expanded operations of a significantly larger and more complex company;

 

•

challenges in keeping existing customers and obtaining new customers; and

 

•

challenges in attracting and retaining key personnel.

Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially impact the business, financial condition and results of operations of New Medtronic. In addition, even if the operations of the businesses of Medtronic and Covidien are integrated successfully, we may not realize the full benefits of the transaction, including the synergies, cost savings or sales or growth opportunities that we expect. These benefits may not be achieved within the anticipated time frame, or at all. Furthermore, additional unanticipated costs may be incurred in the integration of the businesses of Medtronic and Covidien. All of these

 

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factors could negatively impact the earnings per share of New Medtronic, decrease or delay the expected accretive effect of the transaction, and negatively impact the price of New Medtronic’s ordinary shares. As a result, we cannot assure you that the combination of the Medtronic and Covidien businesses will result in the realization of the full benefits anticipated from the transaction.

As a result of the transaction, New Medtronic will incur direct and indirect costs.

New Medtronic will incur costs and expenses in connection with and as a result of the transaction. These costs and expenses include professional fees to comply with Irish corporate and tax laws and financial reporting requirements, costs and expenses incurred in connection with holding a majority of the meetings of the New Medtronic board of directors and certain executive management meetings in Ireland, as well as any additional costs New Medtronic may incur going forward as a result of its new corporate structure. These costs are likely to exceed the costs historically borne by Medtronic and Covidien and may be greater than expected.

Medtronic’s and Covidien’s actual financial positions and results of operations may differ materially from the unaudited pro forma financial data included in this joint proxy statement/prospectus.

The pro forma financial information contained in this joint proxy statement/prospectus are presented for illustrative purposes only and may not be an indication of what New Medtronic’s financial position or results of operations would have been had the transaction been completed on the dates indicated. The pro forma financial information has been derived from the audited and unaudited historical financial statements of Medtronic and Covidien and certain adjustments and assumptions have been made regarding the combined company after giving effect to the transaction. The assets and liabilities of Covidien have been measured at fair value based on various preliminary estimates using assumptions that Medtronic management believes are reasonable utilizing information currently available. The process for estimating the fair value of acquired assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. These estimates may be revised as additional information becomes available and as additional analyses are performed. Differences between preliminary estimates in the pro forma financial information and the final acquisition accounting will occur and could have a material impact on the pro forma financial information and the combined company’s financial position and future results of operations.

In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect New Medtronic’s financial condition or results of operations following the closing. Any potential decline in New Medtronic’s financial condition or results of operations may cause significant variations in the share price of New Medtronic. Please see “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 161.

Disruption in the financial markets could affect Medtronic’s ability to refinance the bridge loan on favorable terms, or at all.

If and to the extent drawn, Medtronic is obligated to repay its $11.3 billion Bridge Credit Agreement within 364 days after the consummation of the transaction. Disruptions in the commercial credit markets or uncertainty in the United States, European Union or elsewhere could result in a tightening of financial markets. In the event of financial market turmoil, Medtronic might be unable to obtain alternate financing in order to repay the bridge loan facility, or refinance the bridge loan entered into in connection with this transaction on favorable terms (or at all).

If Medtronic was unable to successfully obtain alternate financing or refinance at all, New Medtronic would be required to repay all outstanding amounts under the bridge loan facility on its maturity date.

 

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New Medtronic’s substantial leverage and debt service obligations could adversely affect New Medtronic’s business.

In order to finance the cash component of the scheme consideration, Medtronic expects that it or its subsidiaries will receive proceeds from external financing sources (whether utilizing alternate financing arranged prior to the closing of the transaction, or, if such alternate financing is not arranged, the Bridge Credit Agreement). After giving effect to the merger and the acquisition and assuming incremental borrowing prior to the closing of the merger and acquisition in order to pre-fund repayment of upcoming maturities of Medtronic and Covidien debt, New Medtronic expects to have total consolidated external debt of approximately $36 to $38 billion. New Medtronic’s net consolidated borrowing costs, which cannot be predicted at this time, will depend on rates in effect from time to time, the structure of the indebtedness, taxes and other factors.

The degree to which New Medtronic will be leveraged following the transaction could have important consequences to shareholders of New Medtronic, including, but not limited to, potentially:

 

•

increasing New Medtronic’s vulnerability to, and reducing its flexibility to respond to, general adverse economic and industry conditions;

 

•

requiring the dedication of a substantial portion of New Medtronic’s cash flow from operations to the payment of principal of, and interest on, indebtedness, including but not limited to payments under the terms of New Medtronic’s expected debt issuance and repayment of a loan or loans to IrSub from New Medtronic subsidiaries, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions, joint ventures, product research, dividends, share repurchases and development or other general corporate purposes;

 

•

limiting New Medtronic’s flexibility in planning for, or reacting to, changes in New Medtronic’s business and the competitive environment and the industry in which it operates;

 

•

placing New Medtronic at a competitive disadvantage as compared to its competitors, to the extent that they are not as highly leveraged;

 

•

causing the long-term and short-term debt ratings of New Medtronic and its subsidiaries to be lower than the long-term and short-term debt ratings currently applicable to Medtronic and Covidien; and

 

•

limiting New Medtronic’s ability to borrow additional funds and increasing the cost of any such borrowing.

Legislative or other governmental action relating to the denial of U.S. federal or state governmental contracts to U.S. companies that redomicile abroad could adversely affect New Medtronic’s business.

Various U.S. federal and state legislative and other proposals that would deny governmental contracts to U.S. companies that move their corporate location abroad may affect New Medtronic if adopted. We are unable to predict the likelihood that any such proposals might be adopted, the nature of regulations that may be promulgated, or the effect such adoptions and increased regulatory scrutiny may have on New Medtronic’s business.

Future potential changes to the tax laws could result in New Medtronic being treated as a U.S. corporation for U.S. federal tax purposes, and if adopted prior to closing, could jeopardize or delay the consummation of the transaction.

Under current law, New Medtronic is expected to be treated as a foreign corporation for U.S. federal tax purposes. Changes to Section 7874 of the Code, or the U.S. Treasury regulations promulgated thereunder, could affect New Medtronic’s status as a foreign corporation for U.S. federal tax purposes. Any such changes could have prospective or retroactive application, and may apply even if enacted after the transaction is consummated. If New Medtronic were to be treated as a U.S. corporation for federal tax purposes, it could be subject to substantially greater U.S. tax liability than currently contemplated as a non-U.S. corporation.

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subsidiaries would be subject to U.S. tax when repatriated or when deemed recognized under the U.S. tax rules for controlled foreign subsidiaries, including as a result of such subsidiaries having any investments in U.S. property (within the meaning of Section 956 of the Code) such as stock or debt obligations of U.S. affiliates. In such case, New Medtronic would be subject to substantially greater U.S. tax liability than currently contemplated. Additionally, any restructurings of Covidien and its subsidiaries after the transaction that might be undertaken to rationalize the overall structure of New Medtronic might give rise to U.S. taxable gain. Moreover, in such case, a non-U.S. shareholder of New Medtronic would be subject to U.S. withholding tax on the gross amount of any dividends paid by New Medtronic to such shareholder.

Each of Medtronic’s and Covidien’s respective obligations to consummate the transaction is subject to a condition that there having been no change in applicable law (whether or not such change in law is yet effective) with respect to Section 7874 of the Code (or any other U.S. tax law), or any official interpretations thereof as set forth in published guidance by the IRS (other than IRS News Releases) (whether or not such change in official interpretation is yet effective), and there having been no bill that would implement such a change which has been passed in identical form (or substantially identical form such that a conference committee is not required prior to submission of such legislation for the President’s approval or veto) by both houses of Congress and for which the time period for the President of the United States to sign or veto such bill has not yet elapsed, in each case prior to closing, that, once effective, in the opinion of nationally recognized U.S. tax counsel, would cause New Medtronic to be treated as a U.S. domestic corporation for U.S. federal income tax purposes.

Since Section 7874 of the Code was enacted, there have been various legislative proposals to broaden the scope of Section 7874 of the Code, including, most recently, (i) a provision in the Obama Administration’s 2015 budget proposals which, if enacted in its present form, would be effective for transactions completed after December 31, 2014, and (ii) proposals introduced by certain Democratic members of both houses of Congress which, if enacted in their present form, would be effective retroactively to any transactions completed after May 8, 2014. Each proposal would, among other things, treat a foreign acquiring corporation as a U.S. corporation under Section 7874 of the Code if the former shareholders of the U.S. corporation own more than 50% of the shares of the foreign acquiring corporation after the transaction, or if the foreign corporation’s affiliated group has substantial business activities in the United States and the foreign corporation is primarily managed and controlled in the United States. These proposals, if enacted in their present form and if made retroactively effective to transactions completed during the period in which the effective time of the transaction occurs, would cause New Medtronic to be treated as a U.S. corporation for U.S. federal tax purposes.

In addition, as described below, the U.S. Treasury Department and the IRS issued new guidance on September 22, 2014, announcing their intention to issue regulations interpreting Section 7874 of the Code that would apply to transactions completed on or after September 22, 2014. The proposed regulations interpreting Section 7874 of the Code announced in that guidance are not expected to cause New Medtronic to be treated as a U.S. corporation for U.S. federal tax purposes.

The U.S. Treasury Department and the IRS may promulgate rules that would adversely affect New Medtronic’s tax position.

The U.S. Treasury Department has announced that it is examining possible changes in the regulatory rules affecting companies that move their tax domicile outside the United States. Specifically, the U.S. Treasury Department has said that it is “reviewing a broad range of authorities for possible administrative actions that could limit the ability of companies to engage in inversions” and is also considering “approaches that could meaningfully reduce the tax benefits after inversions take place, to at least provide a partial fix” in the event that Congress does not take action in the near future to revise Section 7874 of the Code. In the event the U.S. Treasury Department and the IRS were to change the applicable regulatory rules, New Medtronic could face potentially substantial tax costs as a result of the proposed transaction. We are unable to assess the potential impact of any such possible changes, if adopted, until they are announced. As described below, the U.S. Treasury Department and the IRS issued new guidance on September 22, 2014, announcing their intention to issue

 

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regulations interpreting Section 7874 of the Code that would apply to transactions completed on or after September 22, 2014.

The IRS may not agree with the conclusion that New Medtronic should be treated as a foreign corporation for U.S. federal income tax purposes following the transaction.

A corporation is generally considered a tax resident in the jurisdiction of its organization or incorporation for U.S. federal income tax purposes. Because New Medtronic is an Irish incorporated entity, it would generally be classified as a foreign corporation (and, therefore, a non-U.S. tax resident) under these rules. Even so, the IRS may assert that New Medtronic should be treated as a U.S. corporation (and, therefore, a U.S. tax resident) for U.S. federal income tax purposes pursuant to Section 7874 of the Code.

Under Section 7874 of the Code, if the former shareholders of Medtronic hold 80% or more of the vote or value of the shares of New Medtronic by reason of holding stock in Medtronic (the “ownership test”), and New Medtronic’s expanded affiliated group after the transaction does not have substantial business activities in Ireland relative to its worldwide activities (the “substantial business activities test”), New Medtronic would be treated as a U.S. corporation. Based on the rules for determining share ownership under Section 7874 of the Code, Medtronic shareholders will receive approximately 70% of the ordinary shares of New Medtronic (by both vote and value) by reason of holding stock in Medtronic. Therefore, under current law, New Medtronic should not be treated as a U.S. corporation for U.S. federal income tax purposes. The proposed regulations described in the IRS Notice (as defined herein) issued on September 22, 2014 do not alter this conclusion.

There can be no assurance that the IRS will agree with the position that the ownership test is satisfied. There is limited guidance regarding the application of Section 7874 of the Code, including with respect to the provisions regarding the application of the ownership test.

As described in the risk factor below, the U.S. Treasury Department and the IRS issued new guidance on September 22, 2014 announcing their intention to issue regulations interpreting Section 7874 of the Code that would apply to transactions completed on or after September 22, 2014. The proposed regulations interpreting Section 7874 of the Code announced in that guidance are not expected to cause New Medtronic to be treated as a U.S. corporation for U.S. federal tax purposes.

In addition, as described in more detail in the risk factor above, new statutory or regulatory provisions under Section 7874 of the Code or otherwise could be enacted or promulgated that adversely affect New Medtronic’s status as a non-U.S. corporation for U.S. federal tax purposes, and any such provisions could have retroactive application.

As described in the risk factor above, if New Medtronic were to be treated as a U.S. corporation for federal tax purposes, it could be subject to substantially greater U.S. tax liability than currently contemplated as a non-U.S. corporation.

See “Material Tax Consequences of the Proposed Transaction—U.S. Federal Income Tax Considerations—U.S. Anti-Inversion Rules” beginning on page 141 of this joint proxy statement/prospectus for a more detailed discussion of the application of Section 7874 of the Code to the transaction.

Recent guidance issued by the U.S. Treasury Department and the IRS could result in New Medtronic being subject to significant U.S. tax liabilities after the transaction.

On September 22, 2014, the U.S. Treasury Department and the IRS issued new guidance announcing their intention to issue regulations interpreting multiple sections of the Code, including Section 7874, to address inversion transactions and transactions that Treasury and the IRS characterize as “post-inversion tax avoidance transactions.” When issued, such regulations would apply to transactions completed on or after September 22, 2014. The regulations described in the IRS Notice would expand the set of circumstances under which Section

 

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7874 of the Code would cause the foreign acquirer of a U.S. corporation to be treated as a U.S. corporation for U.S. federal income tax purposes. Such regulations would also impose additional U.S. taxes on certain transactions involving the acquired U.S. corporation’s controlled foreign subsidiaries. In particular, the regulations would:

 

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modify and clarify the rules for computing the ownership test (as defined in the risk factor above) that determines whether the new foreign parent of the acquired U.S. corporation will be treated as a U.S. corporation for U.S. tax purposes under Section 7874 of the Code;

 

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treat investments by controlled foreign subsidiaries of an acquired U.S. corporation in stock or debt obligations of the new foreign parent or certain other foreign affiliates (or pledges or guarantees of such debt obligations) as investments in U.S. property (within the meaning of Section 956 of the Code), with the result that such actions would give rise to a deemed income inclusion by the acquired U.S. corporation; and

 

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cause the acquired U.S. corporation to recognize taxable income in certain other transactions involving the corporation’s controlled foreign subsidiaries.

The proposed regulations interpreting Section 7874 of the Code announced in that guidance are not expected to cause New Medtronic to be treated as a U.S. corporation for U.S. federal tax purposes. However, other regulations proposed in the IRS Notice would cause Medtronic to recognize additional taxable income if Medtronic’s foreign subsidiaries were to make loans to New Medtronic or other foreign affiliates (or to provide pledges or guarantees of the debt obligations of those companies), or if New Medtronic were to engage in transactions addressed by such regulations. As a result, the regulations announced in the IRS Notice are expected to limit New Medtronic’s ability to engage in such transactions.

In addition, in the IRS Notice, the U.S. Treasury Department and the IRS announced their intention to issue additional guidance in the future intended to restrict transactions they characterize as “post-inversion tax avoidance transactions” as described above. According to the IRS Notice, such guidance may include rules to address strategies that reduce U.S. taxes by shifting U.S. earnings to other jurisdictions, including through intercompany debt. We are unable to predict the likelihood that any such guidance will be issued, the nature of regulations that may be promulgated thereunder or the effect such guidance may have on New Medtronic’s business.

New Medtronic’s tax position may be adversely affected by changes in tax law relating to multinational corporations or increased scrutiny by tax authorities.

In addition to potential changes to Section 7874 of the Code, and changes announced in the IRS Notice, recent legislative proposals have aimed to expand the scope of U.S. corporate tax residence, limit the ability of foreign-owned corporations to deduct interest expense, and to make other changes in the taxation of multinational corporations.

Additionally, the U.S. Congress, government agencies in non-U.S. jurisdictions where New Medtronic and its affiliates do business, and the Organisation for Economic Co-operation and Development have recently focused on issues related to the taxation of multinational corporations. One example is in the area of “base erosion and profit shifting,” where profits are claimed to be earned for tax purposes in low-tax jurisdictions, or payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. On September 16, 2014, the Organisation for Economic Co-operation and Development released the first seven components of its comprehensive plan to create an agreed set of international rules for fighting base erosion and profit shifting. As a result, the tax laws in the U.S., Ireland and other countries in which New Medtronic and its affiliates do business could change on a prospective or retroactive basis, and any such changes could materially adversely affect New Medtronic.

 

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Moreover, U.S. and foreign tax authorities may carefully scrutinize companies that result from a cross-border business combination, such as New Medtronic, which may lead such authorities to assert that New Medtronic owes additional taxes.

New Medtronic may face potential limitations on the utilization of Medtronic’s (and its U.S. affiliates’) tax attributes following the completion of the transaction.

Following the acquisition of a U.S. corporation by a foreign corporation, Section 7874 of the Code can limit the ability of the acquired U.S. corporation and its U.S. affiliates to utilize U.S. tax attributes (including net operating losses and certain tax credits) to offset U.S. taxable income resulting from certain transactions as more fully described in “Material Tax Consequences of the Proposed Transaction—U.S. Federal Income Tax Considerations—U.S. Anti-Inversion Rules—Potential Limitation on the Utilization of Medtronic’s (and its U.S. Affiliates’) Tax Attributes” beginning on page 141 of this joint proxy statement/prospectus. Medtronic currently expects that, following the transaction, this limitation will apply and, as a result, Medtronic and its U.S. affiliates could be limited in their ability to utilize their U.S. tax attributes to offset their U.S. taxable income, if any, resulting from certain specified taxable transactions. Please see “Material Tax Consequences of the Proposed Transaction—U.S. Federal Income Tax Considerations—U.S. Anti-Inversion Rules—Potential Limitation on the Utilization of Medtronic’s (and its U.S. Affiliates’) Tax Attributes” beginning on page 141 of this joint proxy statement/prospectus.

New Medtronic will seek Irish High Court approval of the creation of distributable reserves. New Medtronic expects this will be forthcoming, but cannot guarantee this.

Under Irish law, dividends may only be paid and share repurchases and redemptions must generally be funded only out of “distributable reserves,” which New Medtronic will not have immediately following the closing. The creation of distributable reserves of New Medtronic involves a reduction in New Medtronic’s share premium account, which requires the approval of the Irish High Court and, in connection with seeking such court approval, the approval of Medtronic and Covidien shareholders is being sought. The approval of the Irish High Court is expected within 15 weeks following the closing. New Medtronic is not aware of any reason why the Irish High Court would not approve the creation of distributable reserves in this manner; however, the issuance of the required order is a matter for the discretion of the Irish High Court. There will also be no guarantee that the approvals by Medtronic and Covidien shareholders will be obtained. In the event that distributable reserves of New Medtronic are not created, no distributions by way of dividends, share repurchases or otherwise will be permitted under Irish law until such time as the group has created sufficient distributable reserves from its business activities.

The New Medtronic ordinary shares to be received by Medtronic and Covidien shareholders in connection with the transaction will have different rights from the Medtronic common shares and the Covidien ordinary shares.

Upon completion of the merger and the acquisition, Medtronic and Covidien shareholders will become New Medtronic shareholders and their rights as shareholders will be governed by New Medtronic’s memorandum and articles of association and Irish law. The rights associated with each of the Medtronic common shares and Covidien ordinary shares are different from the rights associated with New Medtronic ordinary shares. Material differences between the rights of shareholders of Medtronic and the rights of shareholders of New Medtronic include differences with respect to, among other things, distributions, dividends, repurchases and redemptions, dividends in shares/bonus issues, the election of directors, the removal of directors, the fiduciary and statutory duties of directors, conflicts of interests of directors, the indemnification of directors and officers, limitations on director liability, the convening of annual meetings of shareholders and special shareholder meetings, notice provisions for meetings, the adjournment of shareholder meetings, the exercise of voting rights, shareholder action by written consent, shareholder suits, shareholder approval of certain transactions, rights of dissenting shareholders, anti-takeover measures and provisions relating to the ability to amend the articles of association. Material differences between the rights of New Medtronic shareholders following the transaction and the rights of Covidien shareholders before the transaction include, among other things, differences with respect to repurchases and redemptions, calls on shares

 

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and forfeiture of shares, determinations of the size of the New Medtronic board of directors, the convening of extraordinary shareholder meetings, notices required to make nominations of directors or bring other business in front of shareholder meetings, record dates of shareholder meetings, quorums at shareholder meetings, adjournments of shareholder meetings, the shareholder vote required to approve variations of class rights, the shareholder vote required to approve certain transactions and certain amendments to the articles of association and the inclusion of certain provisions regarding business combinations, control share acquisitions and fair price requirements in tender offers. See “Comparison of the Rights of Holders of Medtronic Common Shares and New Medtronic Ordinary Shares” beginning on page 338 and “Comparison of the Rights of Holders of Covidien Ordinary Shares and New Medtronic Ordinary Shares” beginning on page 370.

As a result of different shareholder voting requirements in Ireland relative to Minnesota, New Medtronic will have less flexibility with respect to certain aspects of capital management than Medtronic currently has.

Under Minnesota law and Medtronic’s articles, Medtronic’s directors may issue, without shareholder approval or any preemptive rights, any shares authorized by its articles of incorporation that are not already issued.

Under Irish law, New Medtronic’s directors may issue new ordinary or preferred shares up to a maximum amount equal to the authorized but unissued share capital, without shareholder approval, once authorized to do so by the memorandum and articles of association of New Medtronic or by an ordinary resolution of the New Medtronic shareholders. Additionally, subject to specified exceptions, Irish law grants statutory preemption rights to existing shareholders to subscribe for new issuances of shares for cash, but allows shareholders to waive their statutory preemption rights by way of special resolution with respect to any particular allotment of shares or generally, subject to a five year limit on such waiver. Accordingly, New Medtronic’s articles of association contain, as permitted by Irish company law, a provision authorizing the board to issue new shares for cash without offering preemption rights. The authorization of the directors to issue shares without further shareholder approval and the authorization of the waiver of the statutory preemption rights must both be renewed by the shareholders at least every five years, and Medtronic cannot provide any assurance that these authorizations will always be approved, which could limit New Medtronic’s ability to issue equity and thereby adversely affect the holders of New Medtronic securities. While Medtronic does not believe that the differences between Minnesota law and Irish law relating to New Medtronic’s capital management will have an adverse effect on New Medtronic, situations may arise where the flexibility Medtronic now has under Minnesota law would have provided benefits to New Medtronic shareholders that will not be available under Irish law. Please see “Comparison of the Rights of Holders of Medtronic Common Shares and New Medtronic Ordinary Shares” beginning on page 338.

The transaction may not allow us to maintain competitive global cash management and a low effective corporate tax rate.

We believe that the transaction should give New Medtronic the ability to maintain competitive global cash management and a competitive worldwide effective corporate tax rate. We cannot give any assurance as to what New Medtronic’s effective tax rate will be after the transaction, however, because of, among other things, uncertainty regarding the tax policies of the jurisdictions where New Medtronic will operate. New Medtronic’s actual effective tax rate may vary from this expectation and that variance may be material. Additionally, the tax laws of Ireland and other jurisdictions could change in the future, and such changes could cause a material change in New Medtronic’s effective tax rate.

Following the completion of the transaction, a transfer of your New Medtronic shares, other than one effected by means of the transfer of book-entry interests in the Depository Trust Company, may be subject to Irish stamp duty.

Transfers of New Medtronic shares effected by means of the transfer of book entry interests in the Depository Trust Company (“DTC”) will not be subject to Irish stamp duty. It is anticipated that the majority of New Medtronic shares will be traded through DTC by brokers who hold such shares on behalf of customers.

 

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However, if you hold your New Medtronic shares directly rather than beneficially through DTC, any transfer of your New Medtronic shares could be subject to Irish stamp duty (currently at the rate of 1% of the higher of the price paid or the market value of the shares acquired). Payment of Irish stamp duty is generally a legal obligation of the transferee. The potential for stamp duty could adversely affect the price of your shares. Note, however, that transfers of Covidien shares are currently subject to the same potential liability to Irish stamp duty in circumstances similar to those in which Irish stamp duty may be payable in respect of New Medtronic shares. Please see “Material Tax Consequences of the Proposed Transaction—Irish Tax Considerations—Stamp Duty” beginning on page 152.

In certain limited circumstances, dividends paid by New Medtronic may be subject to Irish dividend withholding tax.

In certain limited circumstances, dividend withholding tax (currently at a rate of 20%) may arise in respect of dividends paid on New Medtronic shares. A number of exemptions from dividend withholding tax exist such that shareholders resident in the U.S. and shareholders resident in the countries listed in Annex H attached to this joint proxy statement/prospectus may be entitled to exemptions from dividend withholding tax.

Please see “ Material Tax Consequences of the Proposed Transaction—Irish Tax Considerations—Withholding Tax on Dividends” beginning on page 153, and, in particular, please note the requirement to complete certain dividend withholding tax forms in order to qualify for many of the exemptions.

Shareholders resident in the U.S. that hold their shares through DTC will not be subject to dividend withholding tax, provided the addresses of the beneficial owners of such shares in the records of the brokers holding such shares are recorded as being in the U.S. (and such brokers have further transmitted the relevant information to a qualifying intermediary appointed by New Medtronic). However, other shareholders may be subject to dividend withholding tax, which could adversely affect the price of their shares. Note, however, that dividends currently paid on the Covidien shares are subject to similar Irish dividend withholding tax implications and procedures as dividends which will be paid on New Medtronic shares and former Covidien shareholders who hold New Medtronic shares will be able to rely on forms previously filed (until their expiration) with Covidien to receive dividends without Irish withholding tax. Please see “Material Tax Consequences of the Proposed Transaction—Irish Tax Considerations—Withholding Tax on Dividends” beginning on page 153.

After the transaction, dividends received by Irish residents and certain other shareholders may be subject to Irish income tax.

Shareholders entitled to an exemption from Irish dividend withholding tax on dividends received from New Medtronic will not be subject to Irish income tax in respect of those dividends unless they have some connection with Ireland other than their shareholding in New Medtronic (for example, they are resident in Ireland). Shareholders who receive dividends subject to Irish dividend withholding tax will generally have no further liability to Irish income tax on those dividends. Note that similar Irish income tax considerations currently apply to the holders of Covidien shares. Please see “Material Tax Consequences of the Proposed Transaction—Irish Tax Considerations—Income Tax on Dividends Paid on New Medtronic Shares” beginning on page 155.

New Medtronic shares received by means of a gift or inheritance could be subject to Irish capital acquisitions tax.

Irish capital acquisitions tax (“CAT”) could apply to a gift or inheritance of New Medtronic shares irrespective of the place of residence, ordinary residence or domicile of the parties. This is because New Medtronic shares will be regarded as property situated in Ireland. The person who receives the gift or inheritance has primary liability for CAT. Gifts and inheritances passing between spouses are exempt from CAT. Children have a tax-free threshold of €225,000 in respect of taxable gifts or inheritances received from their parents. Note that Covidien ordinary shares are also regarded as property situated in Ireland for CAT purposes and the same CAT considerations also currently

 

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apply to holders of Covidien ordinary shares. Please see “Material Tax Consequences of the Proposed Transaction—Irish Tax Considerations—Capital Acquisitions Tax” beginning on page 156.

It is recommended that each shareholder consult his or her own tax advisor as to the tax consequences of holding shares in and receiving dividends from New Medtronic.

Risks Relating to Medtronic’s Business

As used in this “Risks Relating to Medtronic’s Business” section, references to the “company” refer to Medtronic (and not, for the avoidance of doubt, to Covidien or New Medtronic).

The medical device industry is highly competitive and Medtronic may be unable to compete effectively.

Medtronic competes in both the therapeutic and diagnostic medical markets in more than 140 countries throughout the world. These markets are characterized by rapid change resulting from technological advances and scientific discoveries. In the product lines in which Medtronic competes, Medtronic faces a mixture of competitors ranging from large manufacturers with multiple business lines to small manufacturers that offer a limited selection of niche products. Development by other companies of new or improved products, processes, or technologies may make Medtronic’s products or proposed products less competitive. In addition, Medtronic faces competition from providers of alternative medical therapies such as pharmaceutical companies. Competitive factors include:

 

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product reliability;

 

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product performance;

 

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product technology;

 

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product quality;

 

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breadth of product lines;

 

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product services;

 

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customer support;

 

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price; and

 

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reimbursement approval from health care insurance providers.

Major shifts in industry market share have occurred in connection with product problems, physician advisories, safety alerts, and publications about Medtronic’s products, reflecting the importance of product quality, product efficacy, and quality systems in the medical device industry. In the current environment of managed care, consolidation among health care providers, increased competition, and declining reimbursement rates, Medtronic has been increasingly required to compete on the basis of price. In order to continue to compete effectively, Medtronic must continue to create, invest in, or acquire advanced technology, incorporate this technology into Medtronic’s proprietary products, obtain regulatory approvals in a timely manner, and manufacture and successfully market Medtronic’s products. Given these factors, Medtronic cannot guarantee that the company will be able to continue its level of success in the industry.

Reduction or interruption in supply and an inability to develop alternative sources for supply may adversely affect Medtronic’s manufacturing operations and related product sales.

Medtronic manufactures most of its products at 41 manufacturing facilities located throughout the world. Medtronic purchases many of the components and raw materials used in manufacturing these products from numerous suppliers in various countries. Generally, Medtronic has been able to obtain adequate supplies of such raw materials and components. However, for reasons of quality assurance, cost effectiveness, or availability, Medtronic procures certain components and raw materials from a sole supplier. Medtronic works closely with the company’s suppliers to

 

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try to ensure continuity of supply while maintaining high quality and reliability. However, Medtronic cannot guarantee that these efforts will be successful. In addition, due to the stringent regulations and requirements of the U.S. Food and Drug Administration (the “U.S. FDA”) regarding the manufacture of Medtronic’s products, Medtronic may not be able to quickly establish additional or replacement sources for certain components or materials. A reduction or interruption in supply, and an inability to develop alternative sources for such supply, could adversely affect Medtronic’s ability to manufacture the company’s products in a timely or cost-effective manner and to make the company’s related product sales. Moreover, pursuant to the conflict minerals requirements promulgated by the SEC as a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), Medtronic is required to report on the source of any conflict minerals used in the company’s products, as well as the process Medtronic uses to determine the source of such materials. Medtronic will incur expenses as the company works with its suppliers to evaluate the source of any conflict minerals in the company’s products, and compliance with these requirements could adversely affect the sourcing, supply, and pricing of the company’s raw materials.

Medtronic’s industry is experiencing greater scrutiny and regulation by governmental authorities, which may lead to greater regulation in the future.

Medtronic’s medical devices and Medtronic’s business activities are subject to rigorous regulation, including by the U.S. FDA, the U.S. Department of Justice (“DOJ”), and numerous other federal, state, and foreign governmental authorities. These authorities and members of Congress have been increasing their scrutiny of Medtronic’s industry. For example, Medtronic has received inquiries from members of Congress and other government agencies regarding a variety of matters. In addition, certain state governments and the federal government have enacted legislation aimed at increasing transparency of Medtronic’s interactions with health care providers. As a result, Medtronic is required by law to disclose payments and other transfers of value to health care providers licensed by certain states and, starting with payments or other transfers of value made on or after August 1, 2013, to all U.S. physicians and U.S. teaching hospitals at the federal level. Any failure to comply with these legal and regulatory requirements could impact Medtronic’s business. In addition, Medtronic may continue to devote substantial additional time and financial resources to further develop and implement policies, systems, and processes to comply with enhanced legal and regulatory requirements, which may also impact Medtronic’s business. Medtronic anticipates that governmental authorities will continue to scrutinize Medtronic’s industry closely, and that additional regulation may increase compliance and legal costs, exposure to litigation, and other adverse effects to Medtronic’s operations.

Medtronic is subject to many laws and governmental regulations and any adverse regulatory action may materially adversely affect its financial condition and business operations.

Medtronic’s medical devices are subject to regulation by numerous government agencies, including the U.S. FDA and comparable agencies outside the U.S. To varying degrees, each of these agencies requires Medtronic to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing, and distribution of Medtronic’s medical devices. Medtronic cannot guarantee that the company will be able to obtain marketing clearance for its new products or enhancements or modifications to existing products. If such approval is obtained, it may:

 

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take a significant amount of time;

 

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require the expenditure of substantial resources;

 

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involve stringent clinical and pre-clinical testing, as well as increased post-market surveillance;

 

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involve modifications, repairs, or replacements of Medtronic’s products; and

 

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result in limitations on the proposed uses of Medtronic’s products.

Both before and after a product is commercially released, Medtronic has ongoing responsibilities under U.S. FDA regulations. Medtronic is also subject to periodic inspections by the U.S. FDA to determine compliance with the U.S. FDA’s requirements, including primarily the quality system regulations and medical device reporting regulations. The results of these inspections can include inspectional observations on U.S. FDA’s

 

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Form-483, warning letters, or other forms of enforcement. Since 2009, the U.S. FDA has significantly increased its oversight of companies subject to its regulations, including medical device companies, by hiring new investigators and stepping up inspections of manufacturing facilities. The U.S. FDA has recently also significantly increased the number of warning letters issued to companies. If the U.S. FDA were to conclude that Medtronic is not in compliance with applicable laws or regulations, or that any of Medtronic’s medical devices are ineffective or pose an unreasonable health risk, the U.S. FDA could ban such medical devices, detain or seize adulterated or misbranded medical devices, order a recall, repair, replacement, or refund of such devices, refuse to grant pending pre-market approval applications or require certificates of foreign governments for exports, and/or require Medtronic to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health. The U.S. FDA may also impose operating restrictions on a company-wide basis, enjoin and/or restrain certain conduct resulting in violations of applicable law pertaining to medical devices, and assess civil or criminal penalties against Medtronic’s officers, employees, or the company itself. The U.S. FDA may also recommend prosecution to the DOJ. Any adverse regulatory action, depending on its magnitude, may restrict Medtronic from effectively marketing and selling its products.

In addition, device manufacturers are permitted to promote products solely for the uses and indications set forth in the approved product labeling. A number of enforcement actions have been taken against manufacturers that promote products for “off-label” uses, including actions alleging that federal health care program reimbursement of products promoted for “off-label” uses are false and fraudulent claims to the government. The failure to comply with “off-label” promotion restrictions can result in significant administrative obligations and costs, and potential penalties from, and/or agreements with, the federal government.

Pursuant to Dodd-Frank, the SEC promulgated final rules regarding disclosure of the use of certain minerals, known as “conflict minerals”: tantalum, tin, tungsten (or their ores), and gold, which are mined from the Democratic Republic of the Congo and adjoining countries. Under the rules, Medtronic is now required to disclose the procedures the company employs to determine the sourcing of such minerals and metals produced from those minerals. There are costs associated with complying with these disclosure requirements, including for diligence in regards to the sources of any conflict minerals used in Medtronic’s products, in addition to the cost of remediation and other changes to products, processes, or sources of supply as a consequence of such verification activities. In addition, the implementation of these rules could adversely affect the sourcing, supply, and pricing of materials used in Medtronic’s products. As of the date of Medtronic’s conflict minerals report for the 2013 calendar year, Medtronic was unable to obtain the necessary information on conflict minerals from all of Medtronic’s suppliers and were unable to determine that all of Medtronic’s products are conflict free. Medtronic may continue to face difficulties in gathering this information in the future. Medtronic may face reputational challenges if the company determines that certain of its products contain minerals not determined to be conflict free or if Medtronic is unable to sufficiently verify the origins for all conflict minerals used in the company’s products through the procedures it implements.

Foreign governmental regulations have become increasingly stringent and more common, and Medtronic may become subject to more rigorous regulation by foreign governmental authorities in the future. Penalties for a company’s non-compliance with foreign governmental regulation could be severe, including revocation or suspension of a company’s business license and criminal sanctions. Any domestic or foreign governmental law or regulation imposed in the future may have a material adverse effect on Medtronic. Medtronic’s worldwide operations are also required to comply with the U.S. Foreign Corrupt Practices Act (“FCPA”) and similar anti-bribery laws in other jurisdictions and with U.S. and foreign export control, trade embargo and customs laws. If Medtronic fails to comply with them, the company could suffer civil and/or criminal sanctions.

Medtronic is also subject to various environmental laws and regulations both within and outside the U.S. Medtronic’s operations involve the use of substances regulated under environmental laws, primarily those used in manufacturing and sterilization processes. Medtronic cannot guarantee that compliance with environmental protection laws and regulations will not have a material impact on Medtronic’s consolidated earnings, financial condition, and/or cash flows.

 

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Medtronic’s failure to comply with rules relating to reimbursement and regulation of health care goods and services may subject Medtronic to penalties and adversely impact Medtronic’s reputation and business operations.

Medtronic’s devices and therapies are subject to regulation regarding quality and cost by the U.S. Department of Health and Human Services (“HHS”), including the Centers for Medicare & Medicaid Services (“CMS”) as well as comparable state and non-U.S. agencies responsible for reimbursement and regulation of health care goods and services. U.S. federal government health care laws apply when Medtronic submits a claim on behalf of a U.S. federal health care program beneficiary, or when a customer submits a claim for an item or service that is reimbursed under a U.S. federal government-funded health care program, such as Medicare or Medicaid. The principal U.S. federal laws implicated include those that prohibit the filing of false or improper claims for federal payment, known as the false claims laws; those that prohibit unlawful inducements for the referral of business reimbursable under federally-funded health care programs, known as the anti-kickback laws; and that which prohibits health care service providers seeking reimbursement for providing certain services to a patient who was referred by a physician who has certain types of direct or indirect financial relationships with the service provider, known as the Stark law.

The laws applicable to Medtronic are subject to evolving interpretations. If a governmental authority were to conclude that Medtronic is not in compliance with applicable laws and regulations, Medtronic and its officers and employees could be subject to severe criminal and civil penalties, including, for example, exclusion from participation as a supplier of product to beneficiaries covered by CMS. If Medtronic is excluded from participation based on such an interpretation it could adversely affect the company’s reputation and business operations.

Quality problems with Medtronic’s processes, goods, and services could harm the company’s reputation for producing high-quality products and erode the company’s competitive advantage, sales, and market share.

Quality is extremely important to Medtronic and Medtronic’s customers due to the serious and costly consequences of product failure. Medtronic’s quality certifications are critical to the marketing success of Medtronic’s goods and services. If Medtronic fails to meet these standards, the company’s reputation could be damaged, the company could lose customers, and the company’s revenue and results of operations could decline. Aside from specific customer standards, Medtronic’s success depends generally on the company’s ability to manufacture to exact tolerances precision-engineered components, subassemblies, and finished devices from multiple materials. If Medtronic’s components fail to meet these standards or fail to adapt to evolving standards, the company’s reputation as a manufacturer of high-quality components will be harmed, the company’s competitive advantage could be damaged, and the company could lose customers and market share.

Medtronic is substantially dependent on patent and other proprietary rights and failing to protect such rights or to be successful in litigation related to the company’s rights or the rights of others may result in the company’s payment of significant monetary damages and/or royalty payments, negatively impact the company’s ability to sell current or future products, or prohibit the company from enforcing its patent and other proprietary rights against others.

Medtronic operates in an industry characterized by extensive patent litigation. Patent litigation against Medtronic can result in significant damage awards and injunctions that could prevent Medtronic’s manufacture and sale of affected products or require Medtronic to pay significant royalties in order to continue to manufacture or sell affected products. At any given time, Medtronic is generally involved as both a plaintiff and a defendant in a number of patent infringement actions, the outcomes of which may not be known for prolonged periods of time. While it is not possible to predict the outcome of patent litigation, Medtronic believes the results associated with any such litigation could result in the company’s payment of significant monetary damages and/or royalty payments, negatively impact the company’s ability to sell current or future products, or prohibit the company from enforcing its patent and proprietary rights against others, which would generally have a material adverse impact on Medtronic’s consolidated earnings, financial condition, and/or cash flows.

 

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Medtronic relies on a combination of patents, trade secrets, and non-disclosure and non-competition agreements to protect the company’s proprietary intellectual property, and the company will continue to do so. While Medtronic intends to defend against any threats to the company’s intellectual property, these patents, trade secrets, or other agreements may not adequately protect Medtronic’s intellectual property. Further, pending patent applications owned by Medtronic may not result in patents being issued to the company, patents issued to or licensed by Medtronic in the past or in the future may be challenged or circumvented by competitors and such patents may be found invalid, unenforceable or insufficiently broad to protect Medtronic’s technology or to provide Medtronic with any competitive advantage. Third parties could obtain patents that may require Medtronic to negotiate licenses to conduct the company’s business, and the required licenses may not be available on reasonable terms or at all. Medtronic also relies on non-disclosure and non-competition agreements with certain employees, consultants, and other parties to protect, in part, trade secrets and other proprietary rights. Medtronic cannot be certain that these agreements will not be breached, that the company will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information, or that third parties will not otherwise gain access to the company’s trade secrets or proprietary knowledge.

In addition, the laws of certain countries in which Medtronic markets some of the company’s products do not protect Medtronic’s intellectual property rights to the same extent as the laws of the U.S. If Medtronic is unable to protect the company’s intellectual property in these countries, it could have a material adverse effect on the Medtronic’s business, financial condition, or results of operations.

Product liability claims could adversely impact Medtronic’s financial condition and the company’s earnings and impair the company’s reputation.

Medtronic’s business exposes the company to potential product liability risks that are inherent in the design, manufacture, and marketing of medical devices. In addition, many of the medical devices Medtronic manufactures and sells are designed to be implanted in the human body for long periods of time or indefinitely. Component failures, manufacturing defects, design flaws, or inadequate disclosure of product-related risks or product-related information with respect to Medtronic’s products could result in an unsafe condition or injury to, or death of, a patient. The occurrence of such a problem could result in product liability claims or a recall of, or safety alert relating to, one or more of Medtronic’s products, which could ultimately result, in certain cases, in the removal from the body of such products and claims regarding costs associated therewith. Medtronic has elected to self-insure with respect to product liability risks. Product liability claims or product recalls in the future, regardless of their ultimate outcome, could have a material adverse effect on Medtronic’s business and reputation and on the company’s ability to attract and retain customers for the company’s products.

Health care policy changes, including U.S. health care reform legislation signed in 2010, may have a material adverse effect on Medtronic.

In response to perceived increases in health care costs in recent years, there have been and continue to be proposals by the federal government, state governments, regulators, and third-party payers to control these costs and, more generally, to reform the U.S. health care system. Certain of these proposals could limit the prices Medtronic is able to charge for the company’s products or the amounts of reimbursement available for the company’s products and could limit the acceptance and availability of the company’s products. The adoption of some or all of these proposals could have a material adverse effect on Medtronic’s financial position and results of operations.

In March 2010, President Obama signed into law the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010. Certain provisions of the law will not be effective for a number of years and there are many programs and requirements for which the details have not yet been fully established or consequences not fully understood, and it is unclear what the full impacts will be from the law. The legislation imposes significant new taxes on medical device makers in the form of a 2.3 percent excise tax on all U.S. medical device sales that commenced in January 2013. Under the legislation, the total cost to the medical device industry is expected to be approximately $20 billion over 10 years. Medtronic expects the

 

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new tax will materially and adversely affect Medtronic’s business, cash flows and results of operations. The law also focuses on a number of Medicare provisions aimed at improving quality and decreasing costs. It is uncertain at this point what negative unintended consequences these provisions will have on patient access to new technologies. The Medicare provisions include value-based payment programs, increased funding of comparative effectiveness research, reduced hospital payments for avoidable readmissions and hospital acquired conditions, and pilot programs to evaluate alternative payment methodologies that promote care coordination (such as bundled physician and hospital payments). Additionally, the law includes a reduction in the annual rate of inflation for Medicare payments to hospitals that began in 2011 and the establishment of an independent payment advisory board to recommend ways of reducing the rate of growth in Medicare spending. Medtronic cannot predict what health care programs and regulations will be ultimately implemented at the federal or state level, or the effect of any future legislation or regulation. However, any changes that lower reimbursement for Medtronic’s products or reduce medical procedure volumes could adversely affect Medtronic’s business and results of operations.

Medtronic’s self-insurance program may not be adequate to cover future losses.

Medtronic has elected to self-insure most of the company’s insurable risks. Medtronic made this decision based on conditions in the insurance marketplace that have led to increasingly higher levels of self-insurance retentions, increasing numbers of coverage limitations, and dramatically higher insurance premium rates. Medtronic maintains a directors and officers policy providing limited coverage and continues to monitor the insurance marketplace to evaluate the value to the company of obtaining insurance coverage for other categories of losses in the future. While based on historical loss trends Medtronic believes that the company’s self-insurance program accruals and the company’s existing insurance coverage will be adequate to cover future losses, Medtronic cannot guarantee that this will remain true. Historical trends may not be indicative of future losses. The fact that Medtronic does not maintain third-party insurance coverage for all categories of losses increases Medtronic’s exposure to unanticipated claims, and these losses could have a material adverse impact on Medtronic’s consolidated earnings, financial condition, and/or cash flows.

If Medtronic experiences decreasing prices for the company’s goods and services and the company is unable to reduce its expenses, the results of the Medtronic’s operations will suffer.

Medtronic may experience decreasing prices for the company’s goods and services due to pricing pressure experienced by the company’s customers from managed care organizations and other third-party payers, increased market power of the company’s customers as the medical device industry consolidates, and increased competition among medical engineering and manufacturing services providers. If the prices for Medtronic’s goods and services decrease and Medtronic is unable to reduce the company’s expenses, the results of the company’s operations will be adversely affected.

Continuing worldwide economic instability, including challenges faced by the Eurozone countries, could adversely affect Medtronic’s revenues, financial condition or results of operations.

Since fiscal year 2008, the global economy has been impacted by the sequential effects of an ongoing global financial crisis. This global financial crisis, including the European sovereign debt crisis, has caused extreme disruption in the financial markets, including severely diminished liquidity and credit availability. There can be no assurance that there will not be further deterioration in the global economy. Medtronic’s customers and vendors may experience financial difficulties or be unable to borrow money to fund their operations which may adversely impact their ability to purchase Medtronic’s products or to pay for Medtronic’s products on a timely basis, if at all. As with Medtronic’s customers and vendors, these economic conditions make it more difficult for Medtronic to accurately forecast and plan the company’s future business activities. In addition, a significant amount of Medtronic’s trade receivables are with national health care systems in many countries (including, but not limited to, Greece, Ireland, Portugal, and Spain). Repayment of these receivables is dependent upon the financial stability of the economies of those countries.

 

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In light of these global economic fluctuations, Medtronic continues to monitor the creditworthiness of customers located outside the U.S. Failure to receive payment of all or a significant portion of these receivables could adversely affect Medtronic’s results of operations. Further, there are concerns for the overall stability and suitability of the Euro as a single currency, given the economic and political challenges facing individual Eurozone countries. Continuing deterioration in the creditworthiness of the Eurozone countries, the withdrawal of one or more member countries from the European Union (“EU”), or the failure of the Euro as a common European currency could adversely affect Medtronic’s revenues, financial condition or results of operations.

Medtronic is subject to a variety of market and financial risks due to the company’s international operations that could adversely affect those operations or Medtronic’s profitability and operating results.

Medtronic’s operations in countries outside the U.S., which accounted for 46 percent of Medtronic’s net sales for the fiscal year ended April 25, 2014, are accompanied by certain financial and other risks. Medtronic intends to continue to pursue growth opportunities in sales outside the U.S., especially in emerging markets, which could expose Medtronic to greater risks associated with international sales and operations. Medtronic’s profitability and international operations are, and will continue to be, subject to a number of risks and potential costs, including:

 

•

local product preferences and product requirements;

 

•

longer-term receivables than are typical in the U.S.;

 

•

fluctuations in foreign currency exchange rates;

 

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less intellectual property protection in some countries outside the U.S. than exists in the U.S.;

 

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trade protection measures and import and export licensing requirements;

 

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workforce instability;

 

•

political and economic instability; and

 

•

the potential payment of U.S. income taxes on certain earnings of Medtronic’s subsidiaries outside the U.S. upon repatriation.

In particular, the Obama Administration has announced potential legislative proposals to tax profits of U.S. companies earned abroad. While it is impossible for Medtronic to predict whether these and other proposals will be implemented, or how they will ultimately impact Medtronic, they may materially impact Medtronic’s results of operations if, for example, Medtronic’s profits earned abroad are subject to U.S. income tax or Medtronic is otherwise disallowed deductions as a result of these profits.

Finally, changes in foreign currency exchange rates may reduce the reported value of Medtronic’s foreign currency revenues, net of expenses, and cash flows. Medtronic cannot predict changes in currency exchange rates, the impact of exchange rate changes, nor the degree to which Medtronic will be able to manage the impact of currency exchange rate changes.

Medtronic’s international operations expose Medtronic to legal and regulatory risks, which could have a material effect on Medtronic’s business.

In addition to market and financial risks, Medtronic’s profitability and international operations are, and will continue to be, subject to risks relating to changes in foreign medical reimbursement programs and policies and changes in foreign legal and regulatory requirements. In addition, Medtronic’s international operations are governed by various U.S. laws and regulations, including the FCPA and other similar laws that prohibit Medtronic and Medtronic’s business partners from making improper payments or offers of payment to foreign governments and their officials and political parties for the purpose of obtaining or retaining business. Global enforcement of anti-corruption laws has increased substantially in recent years, with more frequent voluntary self-disclosures by companies, aggressive investigations and enforcement proceedings by U.S. and foreign

 

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governmental agencies, and assessment of significant fines and penalties against companies and individuals. Medtronic’s international operations create the risk of unauthorized payments or offers of payments by one of Medtronic’s employees, consultants, sales agents, or distributors because these parties are not always subject to Medtronic’s control. It is Medtronic’s policy to implement safeguards to discourage these practices. However, Medtronic’s existing safeguards and any future improvements may prove to be less than effective, and Medtronic’s employees, consultants, sales agents, or distributors may engage in conduct for which Medtronic might be held responsible. Any alleged or actual violations of these regulations may subject Medtronic to government scrutiny, severe criminal or civil sanctions and other liabilities, including exclusion from government contracting, and could negatively affect Medtronic’s business, reputation, operating results, and financial condition. In addition, the government may seek to hold Medtronic liable for successor liability FCPA violations committed by any companies in which Medtronic invests or that Medtronic acquires.

Consolidation in the health care industry could have an adverse effect on Medtronic’s revenues and results of operations.

Many health care industry companies, including health care systems, are consolidating to create new companies with greater market power. As the health care industry consolidates, competition to provide goods and services to industry participants will become more intense. These industry participants may try to use their market power to negotiate price concessions or reductions for medical devices that incorporate components produced by Medtronic. If Medtronic is forced to reduce the company’s prices because of consolidation in the health care industry, Medtronic’s revenues would decrease and Medtronic’s consolidated earnings, financial condition, and/or cash flows would suffer.

Medtronic’s business is indirectly subject to health care industry cost-containment measures that could result in reduced sales of medical devices containing Medtronic’s components.

Most of Medtronic’s customers, and the health care providers to whom Medtronic’s customers supply medical devices, rely on third-party payers, including government programs and private health insurance plans, to reimburse some or all of the cost of the procedures in which medical devices that incorporate components Medtronic manufactures or assembles are used. The continuing efforts of governmental authorities, insurance companies, and other payers of health care costs to contain or reduce these costs could lead to patients being unable to obtain approval for payment from these third-party payers. If third-party payer payment approval cannot be obtained by patients, sales of finished medical devices that include Medtronic’s components may decline significantly, and Medtronic’s customers may reduce or eliminate purchases of Medtronic’s components. The cost-containment measures that health care providers are instituting, both in the U.S. and internationally, could harm Medtronic’s ability to operate profitably. For example, managed care organizations have successfully negotiated volume discounts for pharmaceuticals. While this type of discount pricing does not currently exist for medical devices, if managed care or other organizations were able to affect discount pricing for devices, it could result in lower prices to Medtronic’s customers from their customers and, in turn, reduce the amounts Medtronic can charge its customers for the company’s medical devices.

Medtronic’s research and development efforts rely upon investments and investment collaborations, and Medtronic cannot guarantee that any previous or future investments or investment collaborations will be successful.

Medtronic’s strategy to provide a broad range of therapies to restore patients to fuller, healthier lives requires a wide variety of technologies, products, and capabilities. The rapid pace of technological development in the medical industry and the specialized expertise required in different areas of medicine make it difficult for one company alone to develop a broad portfolio of technological solutions. In addition to internally generated growth through Medtronic’s research and development efforts, historically, Medtronic has relied, and expects to continue to rely, upon investments and investment collaborations to provide Medtronic access to new technologies both in areas served by Medtronic’s existing businesses as well as in new areas.

 

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Medtronic expects to make future investments where Medtronic believes that the company can stimulate the development of, or acquire, new technologies and products to further Medtronic’s strategic objectives and strengthen Medtronic’s existing businesses. Investments and investment collaborations in and with medical technology companies are inherently risky, and Medtronic cannot guarantee that any of Medtronic’s previous or future investments or investment collaborations will be successful or will not materially adversely affect Medtronic’s consolidated earnings, financial condition, and/or cash flows.

The continuing development of many of Medtronic’s products depends upon Medtronic maintaining strong relationships with health care professionals.

If Medtronic fails to maintain the company’s working relationships with health care professionals, many of Medtronic’s products may not be developed and marketed in line with the needs and expectations of the professionals who use and support Medtronic’s products, which could cause a decline in Medtronic’s earnings and profitability. The research, development, marketing, and sales of many of Medtronic’s new and improved products is dependent upon Medtronic maintaining working relationships with health care professionals. Medtronic relies on these professionals to provide Medtronic with considerable knowledge and experience regarding the development, marketing, and sale of Medtronic’s products. Physicians assist Medtronic as researchers, marketing and product consultants, inventors, and public speakers. If Medtronic is unable to maintain the company’s strong relationships with these professionals and continue to receive their advice and input, the development and marketing of Medtronic’s products could suffer, which could have a material adverse effect on Medtronic’s consolidated earnings, financial condition, and/or cash flows.

Negative conditions in the global credit market may impair Medtronic’s commercial paper program, Medtronic’s auction rate securities, and Medtronic’s other fixed income securities, which may cause losses and liquidity issues for Medtronic.

Medtronic has investments in marketable debt securities that are classified and accounted for as available-for-sale. Medtronic’s debt securities include U.S. and foreign government and agency securities, corporate debt securities, certificates of deposit, debt funds, and mortgage-backed and other asset-backed securities, including auction rate securities. Market conditions over the past several years have included periods of significant economic uncertainty and at times general market distress, especially in the banking and financial services sector. During these periods of economic uncertainty, Medtronic may experience reduced liquidity across the fixed-income investment market, including the securities in which Medtronic invests. In the event Medtronic needs to sell these securities, Medtronic may not be able to do so in a timely manner or for a value that is equal to the underlying principal. In addition, Medtronic may be required to adjust the carrying value of the securities and record an impairment charge. If Medtronic determines that the fair value of such securities is temporarily impaired, Medtronic would record a temporary impairment as a component of accumulated other comprehensive loss within shareholders’ equity. If it is determined that the fair value of these securities is other-than-temporarily impaired, Medtronic would record a loss in the company’s consolidated statements of earnings, which could materially adversely impact Medtronic’s results of operations and financial condition.

Negative market conditions may also impair Medtronic’s ability to access the capital markets through the issuance of commercial paper or debt securities, or may impact Medtronic’s ability to sell such securities at a reasonable price and may negatively impact Medtronic’s ability to borrow from financial institutions.

Medtronic’s products are continually the subject of clinical trials conducted by Medtronic, Medtronic’s competitors, or other third parties, the results of which may be unfavorable, or perceived as unfavorable, and could have a material adverse effect on Medtronic’s business, financial condition, and results of operations.

As a part of the regulatory process of obtaining marketing clearance for new products and new indications for existing products, Medtronic conducts and participates in numerous clinical trials with a variety of study designs, patient populations, and trial endpoints. Unfavorable or inconsistent clinical data from existing or future

 

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clinical trials conducted by Medtronic, by Medtronic’s competitors, or by third parties, or the market’s or U.S. FDA’s perception of this clinical data, may adversely impact Medtronic’s ability to obtain product approvals, Medtronic’s position in, and share of, the markets in which Medtronic participates, and Medtronic’s business, financial condition, and results of operations.

Failure to integrate acquired businesses into Medtronic’s operations successfully could adversely affect Medtronic’s business.

As part of Medtronic’s strategy to develop and identify new products and technologies, Medtronic has made several acquisitions in recent years and may make additional acquisitions in the future. Medtronic’s integration of the operations of acquired businesses requires significant efforts, including the coordination of information technologies, research and development, sales and marketing, operations, manufacturing, and finance. These efforts result in additional expenses and involve significant amounts of management’s time that cannot then be dedicated to other projects. Medtronic’s failure to manage and coordinate the growth of the combined company successfully could also have an adverse impact on Medtronic’s business. In addition, Medtronic cannot be certain that the businesses Medtronic acquires will become profitable or remain so. If Medtronic’s acquisitions are not successful, Medtronic may record unexpected impairment charges. Factors that will affect the success of Medtronic’s acquisitions include:

 

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the presence or absence of adequate internal controls and/or significant fraud in the financial systems of acquired companies;

 

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adverse developments arising out of investigations by governmental entities of the business practices of acquired companies, including potential liability imposed by the FCPA;

 

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any decrease in customer loyalty and product orders caused by dissatisfaction with the combined companies’ product lines and sales and marketing practices, including price increases;

 

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Medtronic’s ability to retain key employees; and

 

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the ability of the combined company to achieve synergies among its constituent companies, such as increasing sales of the combined company’s products, achieving cost savings, and effectively combining technologies to develop new products.

For additional information regarding risks relating to the transaction, see risk factors above under the headings “Risks Relating to the Transaction” and “Risks Relating to the Business of the Combined Company.”

The medical device industry is the subject of numerous governmental investigations into marketing and other business practices. These investigations could result in the commencement of civil and/or criminal proceedings, substantial fines, penalties, and/or administrative remedies, divert the attention of Medtronic’s management, and have an adverse effect on Medtronic’s financial condition and results of operations.

Medtronic is subject to rigorous regulation by the U.S. FDA and numerous other federal, state, and foreign governmental authorities. These authorities have been increasing their scrutiny of Medtronic’s industry. Medtronic has received subpoenas and other requests for information from state and federal governmental agencies, including, among others, the DOJ and the Office of Inspector General of HHS. These investigations have related primarily to financial arrangements with health care providers, regulatory compliance, and product promotional practices. Similar requests were made of Medtronic’s major competitors.

Medtronic is fully cooperating with these investigations and is responding to these requests. However, Medtronic cannot predict when these investigations will be resolved, the outcome of these investigations, or their impact on Medtronic. An adverse outcome in one or more of these investigations could include the commencement of civil and/or criminal proceedings, substantial fines, penalties, and/or administrative remedies, including exclusion from government reimbursement programs, entry into Corporate Integrity Agreements

 

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(“CIAs”) with governmental agencies and amendments to existing CIAs. In addition, resolution of any of these matters could involve the imposition of additional and costly compliance obligations. Finally, if these investigations continue over a long period of time, they could divert the attention of management from the day-to-day operations of Medtronic’s business and impose significant administrative burdens, including cost, on Medtronic. These potential consequences, as well as any adverse outcome from these investigations or other investigations initiated by the government at any time, could have a material adverse effect on Medtronic’s financial condition and results of operations.

Changes in tax laws or exposure to additional income tax liabilities could have a material impact on Medtronic’s financial condition and results of operations.

Medtronic is subject to income taxes as well as non-income based taxes, in both the U.S. and various jurisdictions outside the U.S. Medtronic is subject to ongoing tax audits in various jurisdictions. Tax authorities may disagree with certain positions Medtronic has taken and assess additional taxes. Medtronic regularly assesses the likely outcomes of these audits in order to determine the appropriateness of Medtronic’s tax provision. However, there can be no assurance that Medtronic will accurately predict the outcomes of these audits, and the actual outcomes of these audits could have a material impact on Medtronic’s consolidated earnings and financial condition. Additionally, changes in tax laws or tax rulings could materially impact Medtronic’s effective tax rate. For example, recent legislation imposed on medical device manufacturers a 2.3 percent excise tax on U.S. sales of medical devices beginning in January 2013. Proposals for fundamental U.S. corporate tax reform, if enacted, could have a material impact on Medtronic’s future results of operations.

Medtronic is increasingly dependent on sophisticated information technology and if Medtronic fails to properly maintain the integrity of the company’s data or if Medtronic’s products do not operate as intended, Medtronic’s business could be materially affected.

Medtronic is increasingly dependent on sophisticated information technology for its products and infrastructure. As a result of technology initiatives, recently enacted regulations, changes in Medtronic’s system platforms and integration of new business acquisitions, Medtronic has been consolidating and integrating the number of systems the company operates and has upgraded and expanded the company’s information systems capabilities. Medtronic’s information systems require an ongoing commitment of significant resources to maintain, protect, and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving systems and regulatory standards, the increasing need to protect patient and customer information, and changing customer patterns. In addition, third parties may attempt to hack into Medtronic’s products or systems and may obtain data relating to patients with Medtronic’s products or Medtronic’s proprietary information. If Medtronic fails to maintain or protect the company’s information systems and data integrity effectively, Medtronic could lose existing customers, have difficulty attracting new customers, have problems in determining product cost estimates and establishing appropriate pricing, have difficulty preventing, detecting, and controlling fraud, have disputes with customers, physicians, and other health care professionals, have regulatory sanctions or penalties imposed, have increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach, or suffer other adverse consequences. There can be no assurance that Medtronic’s process of consolidating the number of systems Medtronic operates, upgrading and expanding Medtronic’s information systems capabilities, protecting and enhancing Medtronic’s systems and developing new systems to keep pace with continuing changes in information processing technology will be successful or that additional systems issues will not arise in the future. Any significant breakdown, intrusion, interruption, corruption, or destruction of these systems, as well as any data breaches, could have a material adverse effect on Medtronic’s business.

 

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SELECTED HISTORICAL FINANCIAL DATA OF MEDTRONIC

Medtronic is providing you with the following selected historical consolidated financial information to assist you in your analysis of the financial aspects of the transaction. Medtronic derived (i) the financial information as of and for the fiscal years ended April 30, 2010 through April 25, 2014 from its audited financial statements for the fiscal years then ended and (ii) the financial information as of and for the three months ended July 25, 2014 and July 26, 2013 from its unaudited condensed consolidated financial statements which include, in the opinion of Medtronic’s management, all normal and recurring adjustments that are considered necessary for the fair presentation of the results for such interim periods and dates. The information set forth below is only a summary that you should read together with the historical audited consolidated financial statements of Medtronic and the related notes and the historical unaudited consolidated financial statements of Medtronic and the related notes, as well as the section titled “Medtronic Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this joint proxy statement/prospectus. Historical results are not necessarily indicative of any results to be expected in the future.

 

		(Unaudited) Three months ended								Fiscal Year Ended Last Friday of April
		July 25, 2014				July 26, 2013
										2014				2013				2012				2011				2010
(in millions, except per share data)
Operating Results for the Fiscal Year:
Net sales		$	4,273			$	4,083			$	17,005			$	16,590			$	16,184			$	15,508			$	15,392
Earnings from continuing operations			871				953				3,065				3,467				3,415				3,055				3,083
Earnings from discontinued operations, net of tax			—				—				—				—				202				41				16
Net earnings			871				953				3,065				3,467				3,617				3,096				3,099
Per Share of Common Stock:
Basic—Earnings from continuing operations		$	0.88			$	0.94			$	3.06			$	3.40			$	3.24			$	2.84			$	2.79
Basic—Net earnings			0.88				0.94				3.06				3.40				3.43				2.87				2.80
Diluted—Earnings from continuing operations			0.87				0.93				3.02				3.37				3.22				2.82				2.78
Diluted—Net earnings			0.87				0.93				3.02				3.37				3.41				2.86				2.79
Cash dividends declared			0.305				0.280				1.12				1.04				0.97				0.90				0.82
Financial Position at Fiscal Year-end:
Working capital		$	15,337			$	13,805			$	15,651			$	13,902			$	10,409			$	9,437			$	8,482
Total assets			37,554				34,972				37,943				34,900				32,818				30,662				28,305
Long-term debt			10,323				9,637				10,315				9,741				7,359				8,112				6,944
Shareholders’ equity			19,248				18,519				19,443				18,671				17,113				15,968				14,629

 

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SELECTED HISTORICAL FINANCIAL DATA OF COVIDIEN

Covidien is providing you with the following selected historical consolidated financial information to assist you in your analysis of the financial aspects of the transaction. Covidien derived (i) the financial information as of September 25, 2009 and September 24, 2010 and as of and for the fiscal years ended September 30, 2011 through September 27, 2013 from its audited consolidated financial statements for the fiscal years then ended, (ii) the financial information for the fiscal years ended September 25, 2009 and September 24, 2010 from its unaudited consolidated financial statements for the fiscal years then ended, as amounts have been recast to reflect Covidien’s former Pharmaceuticals business as discontinued operations, and (iii) the financial information as of and for the nine months ended June 27, 2014 and June 28, 2013 from its unaudited condensed consolidated financial statements which include, in the opinion of Covidien’s management, all normal and recurring adjustments that are considered necessary for the fair presentation of the results for such interim periods and dates. The information set forth below is only a summary that you should read together with the historical audited and unaudited consolidated financial statements of Covidien and the related notes, as well as the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Covidien’s Current Report on Form 8-K filed with the SEC on July 11, 2014 and Covidien’s Quarterly Report on Form 10-Q for the quarterly period ended June 27, 2014 filed with the SEC on July 30, 2014, each of which is incorporated by reference into this joint proxy statement/prospectus. Historical results are not necessarily indicative of any results to be expected in the future.

 

		Nine Months Ended								Fiscal Year Ended Last Friday of September
		June 27, 2014				June 28, 2013
										2013				2012				2011(1)				2010				2009
(in millions, except per share data)
Consolidated Statement of Income Data(2):
Net sales		$	7,925			$	7,675			$	10,235			$	9,851			$	9,607			$	8,438			$	7,813
Gross profit(3)			4,665				4,598				6,085				5,907				5,721				4,945				4,411
Selling, general, and administrative expenses(4)			2,780				2,505				3,340				3,261				3,153				2,825				2,846
Research and development expenses(5)			397				362				508				479				412				333				386
Restructuring charges, net			116				71				105				82				114				66				34
Gain on divestiture, net			(107	)			—				—				—				—				—				—
Operating Income			1,479				1,660				2,132				2,085				2,042				1,721				1,145
Interest expense, net			(143	)			(148	)			(192	)			(191	)			(184	)			(179	)			(151	)
Other income, net(6)			86				74				89				25				22				40				145
Income from continuing operations before income taxes			1,422				1,586				2,029				1,919				1,880				1,582				1,139
Income from continuing operations			1,145				1,236				1,600				1,637				1,581				1,276				501
Consolidated Balance Sheet Data
(End of Period):
Total assets		$	20,223			$	20,215			$	19,918			$	22,257			$	20,374			$	20,387			$	17,139
Long-term debt			4,042				5,063				5,018				4,531				4,197				4,451				2,961
Shareholders’ equity			9,954				9,671				9,242				10,565				9,817				8,974				8,001
Share Data:
Income from continuing operations:
Basic earnings per share		$	2.54			$	2.63			$	3.43			$	3.40			$	3.21			$	2.55			$	1.00
Diluted earnings per share		$	2.51			$	2.61			$	3.40			$	3.37			$	3.18			$	2.53			$	0.99
Cash dividends declared per ordinary share		$	0.64			$	0.52			$	1.10			$	0.94			$	0.83			$	0.74			$	0.66
Basic weighted average number of shares outstanding			451				470				467				481				493				500				503
Diluted weighted average number of shares outstanding			455				474				471				486				497				504				505

 

(1)	Fiscal year 2011 includes 53 weeks. All other fiscal years above include 52 weeks.

 

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(2)	Derived from unaudited consolidated financial statements, as amounts have been recast to reflect Covidien’s former Pharmaceuticals business as discontinued operations.

(3)

Gross profit for the first nine months of fiscal 2014 includes $16 million of charges related to the sale of acquired inventory that had been written up to fair value upon the acquisition of businesses, $5 million of restructuring-related accelerated depreciation expense, and $3 million of inventory impairments resulting from the exit of the OneShot TM renal denervation program. Gross profit for the first nine months of fiscal 2013 includes $2 million of restructuring-related accelerated depreciation expense. Gross profit for fiscal 2013 includes $4 million of restructuring-related accelerated depreciation expense. Gross profit for fiscal 2012 includes $17 million of charges related to the sale of acquired inventory that had been written up to fair value upon the acquisition of a business, $15 million of inventory impairments resulting from a product discontinuance and $5 million of restructuring-related accelerated depreciation expense. Gross profit for fiscal 2011 includes $32 million of charges related to the sale of acquired inventory that had been written up to fair value upon the acquisition of a business and $2 million of restructuring-related accelerated depreciation expense. Gross profit for fiscal 2010 includes $39 million of charges related to the sale of acquired inventory that had been written up to fair value upon the acquisition of a business.

(4)

Amount for the first nine months of fiscal 2014 includes a $181 million legal charge resulting from an increase to Covidien’s estimated indemnification obligation for certain pelvic mesh products liability cases, a charge of $65 million for the estimated additional cost to remediate environmental matters at a site located in Orrington, Maine, transaction costs of $8 million resulting from the definitive agreement to be acquired by Medtronic, a $6 million net charge resulting from the exit of the OneShotTM renal denervation program, and income of $4 million resulting from adjustments to contingent consideration. Amount for the first nine months of fiscal 2013 includes income of $4 million resulting from adjustments to contingent consideration. Amount for fiscal 2013 includes a charge of $4 million resulting from entering into a distribution agreement and income of $3 million resulting from adjustments to contingent consideration. Amount for fiscal 2012 includes legal charges of $49 million related to Covidien’s indemnification obligations for certain claims pertaining to all known pending and estimated future pelvic mesh product liability claims, $20 million of transaction costs associated with acquisitions and a $3 million capital equipment impairment resulting from a product discontinuance. Amount for fiscal 2011 includes legal charges of $35 million related to Covidien’s indemnification obligations for certain claims pertaining to all known pending and estimated future pelvic mesh products liability claims, net of insurance recoveries and shareholder settlement income. Amount for fiscal 2010 includes transaction costs of $39 million associated with acquisitions, a legal charge of $33 million related to an antitrust case and a net loss on divestitures of $25 million. Amount for fiscal 2009 includes charges of $183 million for Covidien’s share of settlements of Tyco International securities cases and Covidien’s portion of the estimated cost to settle all the remaining Tyco International securities cases outstanding, legal charges totaling $94 million for three antitrust cases, a charge of $71 million for the estimated additional cost to remediate environmental matters at a site located in Orrington, Maine and charges totaling $21 million related to divestitures.

(5)	Includes charges resulting from entering into license agreements of $17 million and $12 million during fiscal 2013 and 2012, respectively. Amount for fiscal 2009 includes $115 million of in-process research and development charges.

(6)	Amounts primarily relate to the impact of the tax sharing agreement with Tyco International and TE Connectivity Ltd.

 

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SELECTED UNAUDITED PRO FORMA FINANCIAL DATA

The following selected unaudited pro forma financial data (“selected pro forma data”) gives effect to the acquisition of Covidien by Medtronic. The selected pro forma data have been prepared using the acquisition method of accounting under U.S. generally accepted accounting principles, under which the assets and liabilities of Covidien will be recorded by Medtronic at their respective fair values as of the date the acquisition is completed. The selected Unaudited Pro Forma Condensed Combined Balance Sheet data as of July 25, 2014 gives effect to the transaction as if it had occurred on July 25, 2014. The selected Unaudited Pro Forma Condensed Combined Statements of Earnings data for the three months ended July 25, 2014 and for the fiscal year ended April 25, 2014 give effect to New Medtronic’s results of operations as if the transaction had occurred on April 27, 2013, the beginning of fiscal year 2014.

The selected pro forma data have been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial statements (“pro forma statements”) of the combined company appearing elsewhere in this joint proxy statement/prospectus and the accompanying notes to the pro forma statements. In addition, the pro forma statements were based on, and should be read in conjunction with, the historical audited financial statements of Medtronic (which are available in this joint proxy statement/prospectus), the historical unaudited financial statements of Medtronic for the three-month period ended July 25, 2014 (which are available in this joint proxy statement/prospectus), the historical audited financial statements of Covidien (which are available in Covidien’s Current Report on Form 8-K filed with the SEC on July 11, 2014) and the historical unaudited financial statements of Covidien for the nine-month period ended June 27, 2014 and the six-month periods ended March 28, 2014 and March 29, 2013 (which are available in Covidien’s Quarterly Reports on Form 10-Q for the quarterly periods ended June 27, 2014 and March 28, 2014). See “Where You Can Find More Information” and “Unaudited Pro Forma Condensed Combined Financial Information” sections of this joint proxy statement/prospectus for additional information. The selected pro forma data has been presented for informational purposes only and is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the acquisition been completed as of the dates indicated. In addition, the selected pro forma data does not purport to project the future financial position or operating results of the combined company. Also, as explained in more detail in the accompanying notes to the pro forma statements, the preliminary purchase price (consideration) and fair value assessment of assets and liabilities reflected in the selected pro forma data is subject to adjustment and may vary significantly from the final actual purchase price (consideration) and fair value assessment of assets and liabilities that will be recorded upon completion of the acquisition. Any excess of the purchase price over the fair value of identified assets acquired and liabilities assumed will be recognized as goodwill.

Selected Unaudited Pro Forma Condensed Combined Statement of Earnings Data

 

(in millions, except per share data)		For the three months ended July 25, 2014				For the fiscal year ended April 25, 2014
			(Pro forma combined)				(Pro forma combined)
Net sales		$	6,961			$	27,380
Earnings from continuing operations		$	795			$	2,943
Earnings from continuing operations per share-basic		$	0.56			$	2.05
Earnings from continuing operations per share-diluted		$	0.55			$	2.03
Weighted average shares outstanding-basic			1,427.2				1,436.7
Weighted average shares outstanding-diluted			1,442.6				1,450.9

 

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Selected Unaudited Pro Forma Condensed Combined Balance Sheet

 

(in millions)		As of July 25, 2014
			(Pro forma combined)
Total assets		$	100,789
Long-term debt			31,146
Total liabilities			51,288
Total shareholders’ equity and redeemable noncontrolling interest			49,501

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus and the documents incorporated into it by reference contain forward-looking statements concerning Medtronic, Covidien, New Medtronic, the acquisition, the merger and the other transactions contemplated by the Transaction Agreement that involve risks and uncertainties. All statements, trend analyses and other information contained herein about the markets for the services and products of New Medtronic, Medtronic and Covidien and future trends, plans, events, results of operations or financial condition, as well as other statements identified by the use of forward-looking terminology, including “anticipate,” “believe,” “plan,” “could,” “estimate,” “expect,” “goal,” “forecast,” “guidance,” “predict,” “project,” “intend,” “may,” “possible,” “potential” or the negative of these terms or other similar words, phrases or expressions, constitute forward-looking statements. In particular, statements, express or implied, concerning future actions, conditions or events, future operating results, the ability to generate sales, income or cash flow, to realize cost savings or other benefits associated with the transaction or to pay dividends or repurchase shares are forward-looking statements. These forward-looking statements are not historical facts but instead represent only New Medtronic’s, Medtronic’s and Covidien’s expectations, estimates and projections regarding future events, based on current beliefs of management as well as assumptions made by, and information currently available to, management. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, many of which are outside the control of New Medtronic, Medtronic and Covidien, which may include the risk factors set forth above and other market, business, legal and operational uncertainties discussed elsewhere in this joint proxy statement/prospectus and the documents which are incorporated herein by reference. Those uncertainties include, but are not limited to:

 

•

the inherent uncertainty associated with financial projections;

 

•

failure to satisfy one or more closing conditions with respect to the acquisition and the merger;

 

•

the inability to complete the transaction, including restructuring in connection with the acquisition, on a timely basis or at all;

 

•

adverse regulatory decisions;

 

•

the risk that the required regulatory approvals for the transaction are not obtained, are delayed or are subject to conditions that are not anticipated;

 

•

product liability claims;

 

•

the timing and success of product launches;

 

•

the difficulty of predicting the timing or outcome of product development efforts and regulatory agency approvals or actions, if any;

 

•

potential for adverse pricing movement;

 

•

difficulties or delays in manufacturing;

 

•

reduction or interruption in supply;

 

•

changes in tax laws or interpretations that could increase New Medtronic’s, Medtronic’s or Covidien’s consolidated tax liabilities, including, without limitation, changes in tax laws related to the treatment of intercompany debt, or if the transaction is consummated, changes in tax laws that would affect the availability of treaty benefits, result in New Medtronic being treated as a domestic corporation for U.S. federal tax purposes, or otherwise increase New Medtronic’s consolidated tax liabilities;

 

•

the risks that the new businesses will not be integrated successfully or that the estimated cost savings, synergies and benefits of the acquisition will not be realized;

 

•

access to available financing (including financing for the acquisition or refinancing of Medtronic or Covidien debt) on a timely basis and on reasonable terms;

 

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•

New Medtronic’s ability to refinance the bridge loan facilities, if drawn upon, on favorable terms and to maintain Medtronic’s current long-term credit rating;

 

•

the timing and amount of any dividends or share repurchases;

 

•

unanticipated changes in the markets for Medtronic’s and Covidien’s business segments;

 

•

the anticipated size of the markets and continued demand for Medtronic’s and Covidien’s products;

 

•

unanticipated downturns in business relationships with customers or their purchases from Medtronic or Covidien;

 

•

the ability to execute and realize the expected benefits from strategic initiatives including the transaction as well as revenue growth plans and cost control and productivity improvement programs;

 

•

the risks and uncertainties normally incident to the medical device industry, including industry competition and competitive pressures on Medtronic’s and Covidien’s sales and pricing;

 

•

reduction, interruption or increase in the cost of material, energy and other production costs, or unexpected costs that cannot be recouped in product pricing;

 

•

the availability and pricing of third party sourced products and materials;

 

•

the risks of fluctuations in foreign currency exchange rates;

 

•

the magnitude of any disruptions from manufacturing rationalizations;

 

•

the ability to develop and introduce new products;

 

•

changes in the mix of products sold;

 

•

variability of trade buying patterns;

 

•

the introduction of competing technologies;

 

•

the impact of competitive products and pricing;

 

•

unexpected technical or marketing difficulties;

 

•

unexpected claims, charges, litigation or dispute resolutions;

 

•

the difficulty of predicting the timing or outcome of pending or future litigation or government investigations;

 

•

costs and efforts to defend or enforce intellectual property rights;

 

•

product quality problems;

 

•

political developments;

 

•

changing legislation and governmental regulations;

 

•

changes in capital markets conditions (including currency exchange rate fluctuations), inflation and interest rates;

 

•

the loss of key senior management or scientific staff;

 

•

risks associated with international operations;

 

•

risks associated with self-insurance and commercial insurance;

 

•

successful compliance with governmental regulations applicable to New Medtronic’s, Medtronic’s and Covidien’s facilities, products and/or businesses;

 

•

changes in the laws and regulations, affecting among other things, pricing and reimbursement of pharmaceutical products;

 

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•

health care policy changes;

 

•

exposure to fluctuations in energy prices; and

 

•

volatility of the end markets that Medtronic and/or Covidien serve.

The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and the other risks and uncertainties that affect our businesses described herein and in Medtronic’s and Covidien’s most recent Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and other documents filed from time to time with the SEC or incorporated herein by reference.

Actual results might differ materially from those expressed or implied by these forward-looking statements because these forward-looking statements are subject to assumptions and uncertainties. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus or the date of any document incorporated by reference. All subsequent written and oral forward-looking statements concerning the merger, the acquisition or the other matters addressed in this joint proxy statement/prospectus and attributable to New Medtronic, Medtronic or Covidien or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except as required by applicable law or regulation, none of New Medtronic, Medtronic or Covidien undertakes any obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this joint proxy statement/prospectus or any document incorporated by reference might not occur.

 

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PART 1—THE TRANSACTION AND THE SPECIAL MEETINGS

THE SPECIAL MEETING OF MEDTRONIC’S SHAREHOLDERS

Overview

This joint proxy statement/prospectus is being provided to Medtronic shareholders as part of a solicitation of proxies by the Medtronic board of directors for use at the special meeting of Medtronic shareholders and at any adjournments or postponements of such meeting. This joint proxy statement/prospectus is being furnished to Medtronic shareholders on or about November 21, 2014. In addition, this joint proxy statement/prospectus constitutes a prospectus for New Medtronic in connection with the issuance by New Medtronic of ordinary shares to be delivered to Medtronic shareholders by or at the direction of MergerSub in connection with the transaction. This joint proxy statement/prospectus provides Medtronic shareholders with information they need to be able to vote or instruct their vote to be cast at the special meeting.

Date, Time and Place of the Medtronic Special Meeting

Medtronic will hold a special meeting of shareholders on January 6, 2015 at 8:00 a.m. local time, at the Hyatt Regency, 1300 Nicollet Mall, Minneapolis, MN 55403.

Attendance

Attendance at the Medtronic special meeting is limited to Medtronic shareholders on the Medtronic record date and their proxies. Please indicate on the proxy card if you plan to attend the special meeting. If your shares are held through a bank, broker or other nominee, and you would like to attend, please write to the Office of the Corporate Secretary, 710 Medtronic Parkway, Minneapolis, Minnesota 55432, or bring to the meeting a statement or a letter from the bank, broker or other nominee confirming beneficial ownership of Medtronic shares as of the Medtronic record date. Any beneficial holder who plans to vote at the Medtronic special meeting must obtain a legal proxy from his or her bank, broker or other nominee and should contact such bank, broker or other nominee for instructions on how to obtain a legal proxy. Each Medtronic shareholder may be asked to provide a valid picture identification, such as a driver’s license or passport, and proof of ownership as of the Medtronic record date. The use of cell phones, smartphones, pagers and recording and photographic equipment will not be permitted in the meeting rooms.

Proposals

At the special meeting, Medtronic shareholders will vote upon proposals to:

 

•

adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic;

 

•

approve the reduction of the share premium account of New Medtronic to allow the creation of distributable reserves of New Medtronic;

 

•

approve, on a non-binding, advisory basis, specified compensatory arrangements between Medtronic and its named executive officers relating to the transaction; and

 

•

adjourn the special meeting to another time or place if necessary or appropriate in order (i) to solicit additional proxies if there are insufficient votes at the time of the Medtronic special meeting to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic, (ii) to provide to Medtronic shareholders in advance of the special meeting any supplement or amendment to the joint proxy statement/prospectus or (iii) to disseminate any other information which is material to Medtronic shareholders voting at the special meeting.

Record Date; Outstanding Shares; Shares Entitled to Vote

Only holders of Medtronic common shares at 5:00 p.m. (Eastern Time in the U.S.) on November 18, 2014, the record date for the Medtronic special meeting, will be entitled to notice of, and to vote at, the Medtronic special meeting or any adjournments thereof. On the Medtronic record date, there were 983,545,016 Medtronic

 

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common shares outstanding, held by 46,740 holders of record. Each outstanding Medtronic share is entitled to one vote on each proposal and any other matter properly coming before the Medtronic special meeting.

Quorum

A majority of the outstanding common shares, present in person or by proxy that entitles such shares to be voted at the Medtronic special meeting, will constitute a quorum for the transaction of business at the Medtronic special meeting. Medtronic’s inspector of election intends to treat as “present” for these purposes shareholders who have submitted properly executed or transmitted proxies that are marked “abstain.” The inspector will also treat as “present” at the Medtronic special meeting shares held in “street name” by brokers that are voted on at least one proposal to come before the meeting.

Vote Required; Recommendation of Medtronic’s Board of Directors

Proposal to Adopt the Plan of Merger Contained in the Transaction Agreement and Approve the Revised Memorandum and Articles of Association of New Medtronic

Medtronic shareholders are considering and voting on a proposal to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic. You should carefully read this joint proxy statement/prospectus in its entirety for more detailed information concerning the transaction. In particular, you are directed to the Transaction Agreement, the conditions appendix and the Form of Memorandum and Articles of Association of New Medtronic, which are attached as Annex A, Annex B and Annex D, respectively to this joint proxy statement/prospectus.

The adoption of the plan of merger contained in the Transaction Agreement and the approval of the revised memorandum and articles of association of New Medtronic requires the affirmative vote of holders of a majority of the Medtronic common shares outstanding and entitled to vote on this proposal. Because the vote required to approve this proposal is based upon the total number of outstanding Medtronic common shares, abstentions, failures to vote and broker non-votes will have the same effect as a vote against the proposal to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic.

The board of directors of Medtronic recommends that you vote “FOR” the proposal to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic.

In considering the recommendation of the Medtronic board of directors, Medtronic shareholders should be aware that directors and executive officers of Medtronic have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. See “The Transaction—Interests of Certain Persons in the Transaction—Medtronic.”

Proposal to Create Distributable Reserves of New Medtronic

Medtronic shareholders are considering and voting on a proposal to reduce the share premium account of New Medtronic resulting from (i) the issuance of New Medtronic shares pursuant to the scheme and (ii) a subscription for New Medtronic shares by MergerSub prior to the merger, in order to create distributable reserves of New Medtronic. You should read carefully this joint proxy statement/prospectus in its entirety for more detailed information concerning the creation of distributable reserves. See “Creation of Distributable Reserves of New Medtronic.”

Approval of the proposal to reduce the share premium account of New Medtronic to allow the creation of distributable reserves requires the affirmative vote of holders of a majority of the Medtronic common shares represented, in person or by proxy that authorizes such shares to be voted on this proposal, at the special meeting. Because the vote required to approve this proposal is based upon the total number of Medtronic common shares represented, in person or by proxy that entitles such shares to be voted on this proposal, abstentions and failures by persons in attendance at the special meeting to vote shares that are represented, in person or by proxy that

 

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authorizes such shares to be voted on this proposal, at the special meeting will have the same effect as a vote against this proposal. Broker non-votes will have no effect on this proposal. Approval of this proposal is not a condition to the completion of the transaction and whether or not this proposal is approved will have no impact on the completion of the transaction.

The board of directors of Medtronic recommends that you vote “FOR” the proposal to reduce the share premium account of New Medtronic to allow the creation of distributable reserves.

Proposal to Approve, on a Non-Binding, Advisory Basis, Specified Compensatory Arrangements Between Medtronic and its Named Executive Officers Relating to the Transaction

Medtronic shareholders are considering and voting on a proposal to approve, on a non-binding, advisory basis, specified compensatory arrangements between Medtronic and its named executive officers relating to the transaction. See “The Transaction—Interests of Certain Persons in the Transaction—Medtronic.”

Approval, on a non-binding, advisory basis, specified compensatory arrangements between Medtronic and its named executive officers relating to the transaction requires the affirmative vote of holders of a majority of the Medtronic common shares represented, in person or by proxy that authorizes such shares to be voted on such proposal, at the special meeting. Because the vote required to approve this proposal is based upon the total number of Medtronic common shares represented, in person or by proxy that authorizes such shares to be voted on such proposal, abstentions and failures by persons in attendance at the special Meeting to vote shares that are represented, in person or by proxy that authorizes such shares to be voted on this proposal, at the special meeting will have the same effect as a vote against this proposal. Broker non-votes will have no effect on this proposal. Approval of this proposal is not a condition to the completion of the transaction and whether or not this proposal is approved will have no impact on the completion of the transaction.

The board of directors of Medtronic recommends that you vote “FOR” the proposal to approve, on a non-binding, advisory basis, specified compensatory arrangements between Medtronic and its named executive officers relating to the transaction.

Proposal to Adjourn the Special Meeting

Medtronic shareholders may be asked to vote on a proposal to adjourn the special meeting to another time or place if necessary or appropriate in order (i) to solicit additional proxies if there are insufficient votes at the time of the Medtronic special meeting to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic, (ii) to provide to Medtronic shareholders in advance of the special meeting any supplement or amendment to the joint proxy statement/prospectus or (iii) to disseminate any other information which is material to Medtronic shareholders voting at the special meeting.

Approval of the Medtronic adjournment proposal requires the affirmative vote of holders of a majority of the Medtronic common shares represented, in person or by proxy that authorizes such shares to be voted on such proposal, at the special meeting, whether or not a quorum is present. Because the vote required to approve this proposal is based upon the total number of Medtronic voting shares represented, in person or by proxy that authorizes such shares to be voted on such proposal, abstentions and failures by persons in attendance at the special meeting to vote shares that are represented, in person or by proxy that authorizes such shares to be voted on this proposal, at the special meeting will have the same effect as a vote against this proposal. Broker non-votes will have no effect on this proposal. Approval of this proposal is not a condition to the completion of the transaction and whether or not this proposal is approved will have no impact on the completion of the transaction.

The board of directors of Medtronic recommends that you vote “FOR” the Medtronic adjournment proposal.

 

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Share Ownership and Voting by Medtronic’s Officers and Directors

As of the Medtronic record date, the Medtronic directors and executive officers had the right to vote approximately 424,493 Medtronic common shares, representing approximately 0.04% of the Medtronic common shares then outstanding and entitled to vote at the meeting. It is expected that the Medtronic directors and executive officers who are shareholders of Medtronic will vote “FOR” the proposal to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic, “FOR” the proposal to create distributable reserves of New Medtronic, “FOR” the approval, on a non-binding, advisory basis, of specified compensatory arrangements between Medtronic and its named executive officers relating to the transaction and “FOR” the Medtronic adjournment proposal, although none of them has entered into any agreement requiring them to do so.

Voting Your Shares

Medtronic shareholders may vote in person at the special meeting or by proxy. Medtronic recommends that you submit your proxy even if you plan to attend the special meeting. If you vote by proxy, you may change your vote, among other ways, if you attend and vote at the special meeting.

If you own shares in your own name, you are considered, with respect to those shares, the “shareholder of record.” If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name.” You may vote shares held in “street name” only if you obtain a “legal” proxy from the record holder (broker or other nominee) giving you the right to vote the shares or if you instruct your broker, bank or other nominee how to vote as described below under “—Voting Shares Held in Street Name.”

If you are a Medtronic shareholder of record, you may use the enclosed proxy card to tell the persons named as proxies how to vote your shares. If you properly complete, sign and date your proxy card, your shares will be voted in accordance with your instructions. The named proxies will vote all shares at the meeting for which proxies have been properly submitted and not revoked. If you sign and return your proxy card but do not mark your card to tell the proxies how to vote, your shares will be voted “FOR” the proposals to adopt the plan of merger contained in the Transaction Agreement and approve the revised memorandum and articles of association of New Medtronic, to create distributable reserves of New Medtronic, to approve the advisory proposal and to adjourn the special meeting.

Medtronic shareholders may also vote over the internet at www.proxyvote.com or by telephone at 1-800-690-6903 by 11:59 p.m. (Eastern Time in the U.S.) on January 5, 2015 (or, for shares held through Medtronic, Inc. SIP or the Medtronic Puerto Rico Employees’ SIP, by 11:59 p.m. (Eastern Time in the U.S.) on December 31, 2014). Voting instructions are printed on the proxy card or voting information form you received. Either method of submitting a proxy will enable your shares to be represented and voted at the special meeting.

Medtronic shareholders should not send in their stock certificates with their proxy cards.    As described on page 11 of this joint proxy statement/prospectus, Medtronic shareholders will be sent materials for exchanging Medtronic common shares shortly after the completion of the transaction.

Voting Shares Held in Street Name

If your shares are held in an account through a broker, bank or other nominee, you must instruct the broker, bank or other nominee how to vote your shares by following the instructions that the broker, bank or other nominee provides you along with this joint proxy statement/prospectus. Your broker, bank or other nominee may have an earlier deadline by which you must provide instructions to it as to how to vote your shares, so you should read carefully the materials provided to you by your broker, bank or other nominee.

If you do not provide a signed voting instruction form to your bank, broker or other nominee, your shares will not be voted on any proposal on which the bank, broker or other nominee does not have discretionary authority to vote. This is referred to in this joint proxy statement/prospectus and in general as a broker non-vote.

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specific authorization is required. Brokers do not have discretionary authority to vote on any of the proposals. Shares constituting broker non-votes on a proposal are not counted or deemed to be present in person or by proxy for the purpose of voting on such proposal.

Accordingly, if you fail to provide a signed voting instruction form to your bank, broker or other nominee, your shares held through such bank, broker or other nominee will not be voted.

Revoking Your Proxy

If you are a Medtronic shareholder of record, you may revoke your proxy at any time before it is voted at the special meeting by:

 

•

delivering a written revocation letter to the Corporate Secretary of Medtronic;

 

•

submitting your voting instructions again by telephone or over the internet;

 

•

signing and returning by mail a proxy with a later date so that it is received prior to the special meeting; or

 

•

voting in person at the special meeting and filing a written notice of termination of the prior appointment of a proxy with Medtronic, or by filing a new written appointment of proxy with Medtronic.

Attendance at the special meeting will not, in and of itself, revoke a proxy.

If your shares are held in “street name” by a bank, broker or other nominee, you should follow the instructions of your bank, broker or other nominee regarding the revocation of proxies.

Costs of Solicitation

Medtronic will bear the cost of soliciting proxies from its shareholders, except that, pursuant to the Transaction Agreement, the costs associated with the filing, printing, publication and posting of this joint proxy statement/prospectus to Covidien’s shareholders and Medtronic’s shareholders will be paid 70% by Medtronic and 30% by Covidien.

Medtronic will solicit proxies by mail. In addition, the directors, officers and employees of Medtronic may solicit proxies from its shareholders by telephone, electronic communication, or in person, but will not receive any additional compensation for their services. Medtronic will make arrangements with brokerage houses and other custodians, nominees, and fiduciaries for forwarding proxy solicitation material to the beneficial owners of Medtronic common shares held of record by those persons and will reimburse them for their reasonable out-of-pocket expenses incurred in forwarding such proxy solicitation materials.

Medtronic has engaged a professional proxy solicitation firm, Georgeson Inc., to assist in soliciting proxies for a fee of approximately $19,000. In addition, Medtronic will reimburse Georgeson Inc. for its reasonable disbursements.

Other Business

Medtronic is not aware of any other business to be acted upon at the special meeting. If, however, other matters are properly brought before the special meeting, including an adjournment of the meeting for any reason other than the ones specified in the adjournment proposal, the proxies will have discretion to vote or act on those matters according to their best judgment and they intend to vote the shares as the Medtronic board of directors may recommend.

Assistance

If you need assistance in completing your proxy card or have questions regarding Medtronic’s special meeting, please contact Georgeson Inc., the proxy solicitation agent for Medtronic, by mail at 480 Washington Blvd., 26th Floor, Jersey City, New Jersey 07310, by telephone at (866) 257-5415 (toll free) or (781) 575-2137 (International) or by e-mail at Medtronic@Georgeson.com.

 

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THE SPECIAL MEETINGS OF COVIDIEN’S SHAREHOLDERS

Overview

This joint proxy statement/prospectus is being provided to Covidien shareholders as part of a solicitation of proxies by the Covidien board of directors for use at the special meetings referred to below of Covidien shareholders and at any adjournments or postponements of such meetings. This joint proxy statement/prospectus is being furnished to Covidien shareholders on or about November 21, 2014. In addition, this joint proxy statement/prospectus constitutes a prospectus for New Medtronic in connection with the issuance by New Medtronic of ordinary shares to be delivered to Covidien shareholders in connection with the transaction. This joint proxy statement/prospectus provides Covidien shareholders with information they need to be able to vote or instruct their vote to be cast at the special meetings.

Date, Time and Place of the Covidien Special Meetings

Covidien will convene a special Court-ordered meeting of shareholders on January 6, 2015, at 10:00 a.m. local time, at the Conrad Dublin Hotel, Earlsfort Terrace, Dublin 2, Ireland. Covidien will also convene an extraordinary general meeting of shareholders on January 6, 2015, at 10:15 a.m. local time, at the Conrad Dublin Hotel, Earlsfort Terrace, Dublin 2, Ireland, or, if later, as soon as possible after the conclusion or adjournment of the Covidien special Court-ordered meeting.

Attendance

Attendance at the Covidien special Court-ordered meeting and the Covidien EGM is limited to Covidien shareholders on the Covidien record date and their proxies. Please indicate on the relevant proxy card if you plan to attend the special meetings. If your shares are held through a bank, broker or other nominee, and you would like to attend, please write to John W. Kapples, Vice President and Secretary, Covidien plc, c/o Covidien, 15 Hampshire Street, Mansfield, Massachusetts 02048, or bring to the meeting a statement or a letter from the bank, broker or other nominee confirming beneficial ownership of Covidien shares as of the Covidien record date for the meetings. Any beneficial holder who plans to vote at either meeting must obtain a legal proxy from his or her bank, broker or other nominee and should contact such bank, broker or other nominee for instructions on how to obtain a legal proxy. Each Covidien shareholder may be asked to provide a valid picture identification, such as a driver’s license or passport, and proof of ownership as of the Covidien record date. The use of cell phones, smartphones, pagers and recording and photographic equipment will not be permitted in the meeting rooms.

Proposals

Covidien Special Court-Ordered Meeting: Covidien shareholders are being asked to consider and vote on a proposal at the special Court-ordered meeting to approve the scheme of arrangement.

Covidien Extraordinary General Meeting: Covidien shareholders are also being asked to consider and vote on a proposal at the Covidien EGM to approve the scheme of arrangement, in addition to certain other proposals as set forth in the EGM resolutions described below.

The first three EGM resolutions relate to the approval of the scheme of arrangement and of actions required to be taken in connection with the scheme—specifically, both the cancellation of the shares of Covidien (subject to certain exceptions described in the scheme of arrangement, a copy of which is included in Part 4—Additional Information of this joint proxy statement/prospectus) and the subsequent allotment and issuance of new shares of Covidien to New Medtronic, IrSub and/or their nominee(s) in exchange for the scheme consideration. The fourth EGM resolution also relates to the scheme of arrangement and would ensure that the holders of any new ordinary shares of Covidien issued at or after 10:00 p.m., Irish time, on the last business day before the scheme becomes effective are acquired by New Medtronic, IrSub and/or their nominee(s) for the scheme consideration. The merger and the acquisition are conditioned on approval of EGM resolutions 1 through 4.

 

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1.

EGM Resolution #1: To approve the scheme of arrangement and authorize the directors of Covidien to take all such actions as they consider necessary or appropriate for carrying the scheme of arrangement into effect.

 

2.

EGM Resolution #2: To approve the cancellation of any Covidien ordinary shares in issue prior to 10:00 p.m., Irish time, on the day before the Irish High Court hearing to sanction the scheme (subject to certain exceptions described in the scheme of arrangement, a copy of which is included in Part 4—Additional Information of this joint proxy statement/prospectus).

 

3.

EGM Resolution #3: To authorize the directors of Covidien to allot and issue new Covidien shares, fully paid up, to New Medtronic, IrSub and/or their nominee(s) in connection with effecting the scheme.

 

4.

EGM Resolution #4: To amend the articles of association of Covidien so that any ordinary shares of Covidien that are issued at or after 10:00 p.m., Irish time, on the last business day before the scheme becomes effective are acquired by New Medtronic, IrSub and/or their nominee(s) for the scheme consideration.

The merger and the acquisition are not conditioned on approval of the remaining EGM resolutions. The fifth EGM resolution relates to the creation of distributable reserves of New Medtronic, which are required under Irish law in order for New Medtronic to be able to pay dividends and repurchase or redeem shares after the transaction.

 

5.

EGM Resolution #5: To approve the reduction of the share premium account of New Medtronic resulting from (i) the issuance of New Medtronic shares pursuant to the scheme and (ii) a subscription for New Medtronic shares by MergerSub prior to the merger, in order to create distributable reserves of New Medtronic.

Covidien shareholders are also being asked to vote on the following proposal at the EGM:

 

6.

EGM Resolution #6: To approve, on a non-binding, advisory basis, specified compensatory arrangements between Covidien and its named executive officers relating to the transaction.

Record Date; Outstanding Ordinary Shares; Ordinary Shares Entitled to Vote

Only holders of Covidien ordinary shares as of 5:00 p.m. (Eastern Time in the U.S.) on November 18, 2014, the record date for the Covidien special meetings, will be entitled to notice of, and to vote at the Covidien special meetings or any adjournments thereof. On the Covidien record date, there were 452,731,347 Covidien ordinary shares outstanding, held by 3,258 holders of record. Each outstanding Covidien ordinary share (other than those held by Medtronic or any of its affiliates) is entitled to one vote on each proposal and any other matter properly coming before the Covidien special meetings.

Quorum

The holders of Covidien ordinary shares outstanding, present in person or by proxy, entitling them to exercise a majority of the voting power of Covidien on the Covidien record date will constitute a quorum for each of the special meetings. Covidien’s inspector of election intends to treat as “present” for these purposes shareholders who have submitted properly executed or transmitted proxies that are marked “abstain.” The inspector will also treat as “present” shares held in “street name” by brokers that are voted on at least one proposal to come before the meeting.

Ordinary Share Ownership and Voting by Covidien’s Directors and Officers

As of the Covidien record date, the Covidien directors and executive officers had the right to vote approximately 855,265 of the then-outstanding Covidien ordinary shares at the special meetings, representing

 

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approximately 0.19% of the Covidien ordinary shares then outstanding and entitled to vote at the special Court-ordered meeting and approximately 0.19% of the Covidien ordinary shares then outstanding and entitled to vote at the EGM. The Covidien directors and executive officers who are shareholders of Covidien intend to vote “FOR” the scheme of arrangement at the special Court-ordered meeting, “FOR” the scheme of arrangement at the EGM, “FOR” the cancellation of any Covidien ordinary shares in issue before 10:00 p.m., Irish time, on the day before the Irish High Court hearing to sanction the scheme, “FOR” the authorization of the directors of Covidien to allot and issue new Covidien shares, fully paid up, to New Medtronic, IrSub and/or their nominee(s) in connection with effecting the scheme, “FOR” amendment of the articles of association of Covidien so that any ordinary shares of Covidien that are issued at or after 10:00 p.m., Irish time, on the last business day before the scheme becomes effective are acquired by New Medtronic, IrSub and/or their nominee(s) for the scheme consideration, “FOR” the proposal to reduce the share premium account of New Medtronic resulting from (i) the issuance of New Medtronic shares pursuant to the scheme and (ii) a subscription for New Medtronic shares by MergerSub prior to the merger, in order to create distributable reserves of New Medtronic, and “FOR” the approval, on a non-binding advisory basis, of specified compensatory arrangements between Covidien and its named executive officers, although none of them has entered into any agreement requiring them to do so.

Vote Required; Recommendation of Covidien’s Board of Directors

Covidien Special Court-Ordered Meeting

Proposal to approve the scheme of arrangement: Covidien shareholders are being asked to vote on a proposal to approve the scheme at both the Covidien special Court-ordered meeting and at the Covidien EGM. The vote required for such proposal is different at each of the meetings, however. As set out in full under the section entitled “Part 2—Explanatory Statement—Consents and Meetings,” the approval required at the special Court-ordered meeting is a majority in number of the Covidien shareholders of record casting votes on the proposal representing three-fourths (75 percent) or more in value of the Covidien ordinary shares held by such holders, present and voting either in person or by proxy.

Because the vote required to approve the proposal at the Covidien special Court-ordered meeting is based on votes properly cast at the meeting, and because abstentions and broker non-votes are not considered votes properly cast, abstentions and broker non-votes, along with failures to vote, will have no effect on such proposal.

The merger and the acquisition are conditioned on approval of the scheme at the Covidien special Court-ordered meeting.

The Covidien board of directors recommends that Covidien shareholders vote “FOR” the proposal to approve the scheme of arrangement at the special Court-ordered meeting.

In considering the recommendation of the Covidien board of directors, Covidien shareholders should be aware that directors and executive officers of Covidien have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. See “The Transaction—Interests of Certain Persons in the Transaction—Covidien.”

 

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Covidien Extraordinary General Meeting

Set forth below is a table summarizing certain information with respect to the EGM Resolutions:

 

EGM Resolution #		Resolution		Ordinary or Special Resolution?		Transaction Conditioned on Approval of Resolution?
1		Approve the scheme of arrangement and authorize the directors of Covidien to take all such actions as they consider necessary or appropriate for carrying the scheme of arrangement into effect.		Ordinary		Yes
2		Approve the cancellation of any Covidien ordinary shares in issue before 10:00 p.m., Irish time, on the day before the Irish High Court hearing to sanction the scheme.		Special		Yes
3		Authorize the directors of Covidien to allot and issue new Covidien shares, fully paid up, to New Medtronic, IrSub and/or their nominee(s) in connection with effecting the scheme.		Ordinary		Yes
4		Amend the articles of association of Covidien so that any ordinary shares of Covidien that are issued at or after 10:00 p.m., Irish time, on the last business day before the scheme becomes effective are acquired by New Medtronic, IrSub and/or their nominee(s) for the scheme consideration.		Special		Yes
5		Approve the reduction of the share premium account of New Medtronic resulting from (i) the issuance of New Medtronic shares pursuant to the scheme and (ii) a subscription for New Medtronic shares by MergerSub prior to the merger, in order to create distributable reserves of New Medtronic.		Ordinary		No
6		Approve, on a non-binding, advisory basis, specified compensatory arrangements between Covidien and its named executive officers relating to the transaction.		Ordinary		No

At the Covidien EGM, the requisite approval of each of the EGM resolutions depends on whether it is an “ordinary resolution” (EGM resolutions 1, 3, 5 and 6), which requires the approval of the holders of at least a majority of the votes cast by the holders of Covidien ordinary shares present and voting, either in person or by proxy, or a “special resolution” (EGM resolutions 2 and 4), which requires the approval of the holders of at least 75 percent of the votes cast by the holders of Covidien ordinary shares present and voting, either in person or by proxy.

For all the EGM resolutions, because the votes required to approve such resolutions are based on votes properly cast at the meeting, and because abstentions and broker non-votes are not considered votes properly cast, abstentions and broker non-votes, along with failures to vote, will have no effect on the EGM resolutions.

The Covidien board of directors recommends that Covidien shareholders vote “FOR” the proposals to approve each of the EGM resolutions.

In considering the recommendations of the Covidien board of directors, Covidien shareholders should be aware that directors and executive officers of Covidien have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. See “The Transaction—Interests of Certain Persons in the Transaction—Covidien.”

 

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Voting Your Ordinary Shares

Covidien shareholders may vote by proxy or in person at the special meetings. Covidien recommends that you submit your proxy even if you plan to attend the special meetings. If you vote by proxy, you may change your vote, among other ways, if you attend and vote at the special meetings.

If you own shares in your own name, you are considered, with respect to those shares, the “shareholder of record.” If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name.”

If you are a Covidien shareholder of record you may use the enclosed proxy cards to tell the persons named as proxies how to vote your shares. If you are a Covidien shareholder of record, the shares listed on your proxy cards will include the following shares, if applicable:

 

•

shares issued under the Covidien Savings Related Share Plan; and

 

•

shares held in a book-entry account at Computershare Trust Company, N.A., Covidien’s transfer agent.

If you properly complete, sign and date a proxy card, your shares will be voted in accordance with your instructions. The named proxies will vote all shares at the meetings for which proxies have been properly submitted and not revoked. If you sign and return a proxy card appointing the Chairman as your proxy but do not mark your card to tell the proxy how to vote on a voting item, your shares will be voted with respect to such item in accordance with the recommendations of the Covidien board of directors.

Covidien shareholders may also vote over the internet at www.proxyvote.com or by telephone at +1-800-690-6903 anytime up to 11:59 p.m. (Eastern Time in the U.S.) on the day immediately preceding the relevant meeting. Voting instructions are printed on the proxy cards or voting information form you received. Either method of submitting a proxy will enable your shares to be represented and voted at the special meetings.

Voting Ordinary Shares Held in Street Name

If your shares are held in an account through a bank, broker or other nominee, you must instruct the bank, broker or other nominee how to vote your shares by following the instructions that the bank, broker or other nominee provides you along with this joint proxy statement/prospectus. Your bank, broker or other nominee, as applicable, may have an earlier deadline by which you must provide instructions to it as to how to vote your shares, so you should read carefully the materials provided to you by your bank, broker or other nominee.

If you do not provide a signed voting instruction form to your bank, broker or other nominee, your shares will not be voted on any proposal on which the bank, broker or other nominee does not have discretionary authority to vote. This is referred to in this joint proxy statement/prospectus and in general as a broker non-vote. In these cases, the bank, broker or other nominee will not be able to vote your shares on those matters for which specific authorization is required. Brokers do not have discretionary authority to vote on any of the proposals.

Accordingly, if you fail to provide a signed voting instruction form to your bank, broker or other nominee, your shares held through such bank, broker or other nominee will not be voted.

Revoking Your Proxy

If you are a Covidien shareholder of record, you may revoke your proxy at any time before it is voted at the relevant special meeting by:

 

•

delivering a written revocation letter to the Secretary of Covidien;

 

•

submitting your voting instructions again by telephone or over the internet;

 

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•

signing and returning by mail a proxy with a later date so that it is received prior to the special meeting; or

 

•

attending the special meeting and voting by ballot in person.

Attendance at either special meeting will not, in and of itself, revoke a proxy.

If your shares are held in “street name” by a bank, broker or other nominee, you should follow the instructions of your bank, broker or other nominee regarding the revocation of proxies.

Costs of Solicitation

Covidien will bear the cost of soliciting proxies from its shareholders, except that, pursuant to the Transaction Agreement, the costs associated with the filing, printing, publication and posting of this joint proxy statement/prospectus to Covidien’s shareholders and Medtronic’s shareholders will be paid 70% by Medtronic and 30% by Covidien.

Covidien will solicit proxies by mail. In addition, the directors, officers and employees of Covidien may solicit proxies from its shareholders by telephone, electronic communication, or in person, but will not receive any additional compensation for their services. Covidien will make arrangements with brokerage houses and other custodians, nominees and fiduciaries for forwarding proxy solicitation material to the beneficial owners of Covidien ordinary shares held of record by those persons and will reimburse them for their reasonable out-of-pocket expenses incurred in forwarding such proxy solicitation materials.

Covidien has engaged a professional proxy solicitation firm, D.F. King & Co., Inc., to assist in soliciting proxies for a fee of approximately $20,000. In addition, Covidien will reimburse D.F. King & Co., Inc. for its reasonable disbursements.

Other Business

Covidien is not aware of any other business to be acted upon at the special meetings. If, however, other matters are properly brought before the special meetings, the proxies will have discretion to vote or act on those matters according to their best judgment and they intend to vote the shares as the Covidien board of directors may recommend.

Adjournment; Postponement

Any adjournment or postponement of the special Court-ordered meeting will result in an adjournment or postponement, as applicable, of the EGM.

Under the Covidien articles of association, the Chairman of the Covidien EGM may at any time adjourn the EGM or the special Court-ordered meeting if, in his opinion, it would facilitate the conduct of the business of the EGM or the special Court-ordered meeting, as applicable, to do so or if he is so directed by the Covidien board of directors. Pursuant to this authority, subject to certain limitations contained in the Transaction Agreement, the EGM or the special Court-ordered meeting may be adjourned to, among other things, solicit proxies if there are not sufficient votes at the time of the EGM or the special Court-ordered meeting, as applicable, in favor of the above-described proposals and resolutions, as applicable.

Assistance

If you need assistance in completing your proxy card or have questions regarding Covidien’s special meetings, please contact D.F. King & Co., Inc., the proxy solicitation agent for Covidien, by mail at 48 Wall Street, 22^nd Floor, New York, New York 10005, by telephone at (800) 488-8035 (toll free in the U.S. and Canada) or (212) 269-5550 (collect), or by e-mail at covidien@dfking.com.

 

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THE TRANSACTION

The Merger and the Acquisition

On June 15, 2014, Medtronic and Covidien entered into the Transaction Agreement by and among Covidien, Medtronic, New Medtronic, IrSub, U.S. AcquisitionCo, and MergerSub. Under the terms of the Transaction Agreement, (i) New Medtronic and IrSub will acquire Covidien pursuant to a scheme of arrangement under Section 201, involving a cancellation of the issued share capital of Covidien under Sections 72 and 74, of the Irish Companies Act 1963 and (ii) MergerSub will merge with and into Medtronic, with Medtronic as the surviving corporation in the merger. As a result of the transaction, both Medtronic and Covidien will become wholly owned subsidiaries of New Medtronic. Prior to the closing of the transaction, New Medtronic will re-register as a public limited company, the ordinary shares of which are expected to be listed on the NYSE.

As a result of the transaction, (i) each outstanding Medtronic common share will entitle its holder to receive one New Medtronic ordinary share in exchange for such Medtronic common share and (ii) each outstanding Covidien ordinary share (other than certain Covidien ordinary shares to be held by nominees on behalf of New Medtronic and/or IrSub in connection with the transaction) will entitle its holder to receive (x) $35.19 in cash and (y) 0.956 of a New Medtronic ordinary share in exchange for such Covidien ordinary share.

Medtronic reserves the right, subject to the prior written approval of the Irish Takeover Panel, to effect the acquisition by way of a takeover offer, as an alternative to the scheme, in the event that a third party makes an alternative proposal to acquire Covidien or Medtronic considers that such a proposal is reasonably expected to be made (or another “competitive situation” (as defined in the Irish Takeover Rules) exists or may reasonably be expected to arise), subject to the terms of the Transaction Agreement. In such event, such takeover offer will be implemented on terms and conditions that are at least as favorable to Covidien shareholders (except for an acceptance condition set at 80 percent of the nominal value of the Covidien shares to which such offer relates and which are not already beneficially owned by Medtronic) as those which would apply in relation to the scheme, among other requirements.

Background of the Transaction

The Covidien board of directors has, on an ongoing basis, considered the long-term strategy of Covidien and strategic opportunities that might be available to Covidien to enhance shareholder value, including additional investments in new growth opportunities, potential acquisitions and the possible sale or merger of Covidien. Following consideration by the Covidien board of directors of various potential strategic opportunities, on March 20, 2014, the Covidien board of directors authorized Covidien management to approach Medtronic to discuss a potential combination of the two companies. The Covidien board of directors made this decision based on its determination that Medtronic likely would have the best strategic fit with Covidien, was most likely to have an interest in and ability to execute, and would be willing to pay the highest price in, a business combination with Covidien, should the Covidien board ultimately decide to engage in such a transaction.

As a part of the ongoing review of Medtronic’s long-term strategy, the Medtronic board of directors has, from time to time, considered strategic opportunities that might be available to it to enhance shareholder value, including additional investments in new growth opportunities and potential acquisitions, taking into account global healthcare, industry and transaction trends as well as economic and other conditions generally. In this context, Medtronic management identified that expanding Medtronic’s product offerings to include a broader product portfolio would be a way to better position Medtronic to execute on its globalization and economic value strategies.

As a result of the prior strategic review of Covidien’s business and the determination that a combination with Medtronic presented a compelling opportunity, and pursuant to the authorization of the Covidien board of directors, on March 25, 2014, Mr. José E. Almeida, President and Chief Executive Officer of Covidien, called Mr. Omar Ishrak, Chief Executive Officer of Medtronic, to arrange an in-person meeting that was held on April 2, 2014. During this meeting, Messrs. Almeida and Ishrak discussed a variety of opportunities and

 

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challenges facing their respective businesses in the new healthcare environment and Mr. Almeida suggested to Mr. Ishrak that Medtronic consider a potential combination of Covidien and Medtronic. Mr. Almeida described to Mr. Ishrak various aspects of Covidien’s business and his views on the healthcare industry as well as the strategic rationale for such a combination. Mr. Almeida discussed, among other things, the trend of consolidation in the healthcare industry and the consequent importance of scale to the future of both companies; his expectation that the combined company would benefit from global reach and its ability to leverage its international infrastructure, particularly in emerging markets; the complementary portfolios of Medtronic and Covidien; and the alignment of the long-term strategic goals of both companies. The meeting concluded with Mr. Ishrak telling Mr. Almeida that he would discuss the possibility of a potential transaction with Medtronic’s lead independent director and the Medtronic management team.

On April 3, 2014, Mr. Ishrak called Mr. Almeida to schedule a meeting between several members of the Medtronic and Covidien management teams to further discuss the potential benefits of a combination of the two companies. Also that day, Mr. Ishrak called and discussed the meeting with Richard Anderson, Medtronic’s lead independent director. On April 11, 2014, Mr. Ishrak, Mr. Almeida and members of their respective management teams met in person and discussed, on a confidential basis, Covidien’s product portfolio, business strategy and long-term outlook and Covidien’s view of potential operational synergies that a combination of the two companies could create. Medtronic’s management team explained to Covidien’s management team that, before engaging in further discussions, they needed to discuss these matters with the Medtronic board of directors, and determine whether a combination of the two companies could be expected to be in the best interests of Medtronic and its shareholders.

During an executive session of a regularly scheduled meeting of the Medtronic board of directors on April 17, 2014, Mr. Ishrak described for the Medtronic board the conversations to date with Covidien. Members of the Medtronic board of directors asked questions and discussed Mr. Ishrak’s report and the conversations with Covidien. Following this discussion, the Medtronic board of directors authorized Medtronic management to explore a possible transaction with Covidien and designated four independent members of the Medtronic board as an ad hoc working group available to provide Medtronic management with prompt guidance and advice, from time to time, in connection with a potential transaction with Covidien. Following the meeting of the Medtronic board of directors, members of Medtronic management, including Mr. Ishrak, met with the directors in the ad hoc working group for further discussion. Between April 17 and June 13, 2014, the directors’ ad hoc working group met telephonically from time to time with Mr. Ishrak and other members of Medtronic’s management team to discuss the status of the potential transaction and the Medtronic management team’s discussions with the Covidien management team. During these meetings, the ad hoc working group provided management with guidance and advice regarding the potential transaction with Covidien.

On April 18, 2014, Mr. Ishrak and Mr. Almeida spoke by telephone and discussed next steps in exploring a possible combination of the two companies. Mr. Ishrak informed Mr. Almeida that the Medtronic board of directors authorized Mr. Ishrak to continue discussions with Covidien regarding a possible transaction. Mr. Ishrak also indicated that the initial phase of discussions should focus on confirming that there was a sound strategic and operational rationale for a combination of the two companies, with which Mr. Almeida agreed. Mr. Ishrak and Mr. Almeida acknowledged that only if the boards of directors of each of Medtronic and Covidien concluded that there was a compelling strategic rationale would the respective boards authorize Medtronic and Covidien management to pursue discussions related to other considerations, such as valuation, diligence and transaction structure.

On April 23, 2014, Covidien and Medtronic entered into a mutual confidentiality agreement, which included a reciprocal 15-month “standstill” provision. Following the execution of the confidentiality agreement and through the execution of the Transaction Agreement on June 15, 2014, representatives of Covidien and Medtronic (including advisors) conducted due diligence on Medtronic and Covidien, respectively.

On April 24, 2014, representatives of Goldman Sachs contacted Perella Weinberg to discuss various matters relating to the potential transaction, including due diligence and overall transaction timing. During the course of

 

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this conversation, Goldman Sachs advised Perella Weinberg that Covidien did not view a potential transaction between the parties as a merger-of-equals and instead would view any transaction as an acquisition of Covidien by Medtronic.

On May 2, 2014, members of the Covidien and Medtronic management teams met in person to discuss Covidien’s business and prospects. During this meeting, members of Covidien management presented to Medtronic’s management team information concerning Covidien’s internal management structure, portfolio, business strategy, product pipeline, various financial metrics and financial outlook and Covidien’s perspective as to the strategic rationale for Medtronic’s potential acquisition of Covidien, including potential synergies.

On May 4, 2014, Mr. Ishrak called Mr. Almeida to set up an in-person meeting. During this call, Mr. Ishrak expressed Medtronic’s interest in continuing discussions with respect to a potential transaction and his favorable view of the opportunities such a combination would create based on the management presentations conducted on May 2, 2014. Mr. Ishrak and Mr. Almeida discussed the process for conducting due diligence on their respective companies and the information that would need to be provided and discussions that would need to be held in order for Medtronic to be in a position to provide Covidien with a preliminary, non-binding proposal at the end of May 2014 if it decided to proceed. At the conclusion of this conversation, Mr. Ishrak and Mr. Almeida agreed to meet in person on May 10, 2014 to further discuss next steps.

On May 10, 2014, Mr. Ishrak and Mr. Almeida met in person and discussed the types of potential synergies a combination of the two companies might generate, the business strategy of the combined company and the structure and timing of a possible transaction. During this meeting, Mr. Ishrak indicated that Medtronic was still analyzing whether to proceed with a potential transaction and, if it decided to proceed, then Medtronic expected to be in a position to provide Covidien with a preliminary, non-binding proposal, at the end of May 2014.

Between May 10 and June 6, 2014, representatives of Covidien’s and Medtronic’s management teams and their respective legal and financial advisors held several discussions regarding due diligence and transaction structuring matters including due diligence with respect to each company’s ongoing litigation and intellectual property matters and how the transaction should be structured in order to maximize the benefits to each of the companies and their respective shareholders. As part of these due diligence discussions, on May 15, 2014, representatives of Covidien’s and Medtronic’s management teams held a teleconference to discuss Covidien’s ongoing litigation and other contingent liabilities, and on June 6, 2014, representatives of Covidien’s and Medtronic’s management teams held a teleconference to discuss Medtronic’s ongoing litigation and other contingent liabilities. Also as part of these structuring discussions, on May 21, 2014, representatives of Covidien’s and Medtronic’s management teams, as well as representatives of Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”), Covidien’s legal counsel in connection with the transaction, and representatives of Cleary Gottlieb Steen & Hamilton LLP (“Cleary Gottlieb”), Medtronic’s legal counsel in connection with the transaction, held a teleconference in response to the request of Medtronic management for further information regarding Covidien’s organizational structure. The parties discussed potential structures for an acquisition of Covidien by Medtronic and the implications of different structural approaches.

On May 16, 2014, the Medtronic board of directors held an in person meeting in Minneapolis, Minnesota, attended by members of Medtronic management, as well as representatives of Cleary Gottlieb and Perella Weinberg. At this meeting, Medtronic management provided to the Medtronic board of directors an overview of Covidien, including its organizational and operating structure, product portfolio, historical financial performance and growth prospects, and reviewed the strategic and financial rationale for a potential transaction with Covidien, including a preliminary assessment of potential synergies and a discussion of potential benefits of the potential transaction to patients. Medtronic management, together with representatives of Cleary Gottlieb and Perella Weinberg, then provided an overview of potential transaction structures and discussed various risks associated with a transaction with Covidien. Members of the Medtronic board of directors asked questions and discussed the various presentations and related matters throughout the meeting and Medtronic management and representatives of Perella Weinberg and Cleary Gottlieb responded to comments and questions from the directors.

 

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On May 21 and May 22, 2014, the Covidien board of directors held a regularly scheduled meeting in Dublin, Ireland, attended, for certain parts of the meeting, by members of Covidien management and representatives of Wachtell Lipton and Goldman Sachs. Mr. Almeida described to the Covidien board of directors the discussions that had taken place with Medtronic, including that if Medtronic decided to proceed with a potential transaction, it expected to be in a position to provide Covidien with a preliminary, non-binding proposal at the end of May. During this meeting, a representative of Wachtell Lipton discussed with the Covidien board of directors an overview of the duties of directors and the Irish Takeover Rules in the context of a possible transaction with Medtronic. Also during this meeting, representatives of Goldman Sachs provided an update on recent M&A activity in the healthcare industry and an overview of Medtronic. Representatives of Goldman Sachs also reviewed with the Covidien board of directors an illustrative standalone financial analysis of Covidien, an illustrative financial analysis of Covidien and Medtronic combined, based on conversations with Covidien management, and the strategic rationale for an acquisition of Covidien by Medtronic, noting the strategic and financial benefits from such a transaction as compared to Covidien remaining a stand-alone company. In addition, representatives of Goldman Sachs reviewed with the Covidien board of directors key financial metrics for evaluating a potential proposal from Medtronic. Detailed discussions ensued throughout this meeting.

On May 22, 2014, the Medtronic board of directors held a telephonic meeting, attended by members of Medtronic management, as well as representatives of Cleary Gottlieb and Perella Weinberg. Medtronic management reviewed with the Medtronic board of directors certain historical and projected financial information for each of Medtronic and Covidien on a standalone basis and an illustrative financial analysis of Medtronic and Covidien combined, both with and without the impact of anticipated synergies. The Medtronic board of directors also discussed the strategic rationale for, and potential benefits of, the proposed transaction, including the anticipated strategic benefits, cost synergies and potential access to substantially all of Covidien’s cash without subjecting it to U.S. tax. Medtronic management also reviewed with the Medtronic board of directors various potential transaction structures and post-closing ownership percentages in the combined company for Medtronic and Covidien shareholders, noting that any potential transaction would likely involve Covidien shareholders receiving a mix of cash and stock in the combined company. Mr. Ishrak and the other members of the Medtronic board of directors emphasized the importance of a strong integration team that would work to achieve the anticipated synergies with as little disruption as possible to the business teams’ ability to execute on their strategic plans. The Medtronic board of directors, Medtronic management and the advisors then discussed recent proposals for potential U.S. tax reform and the potential impact that such proposals might have on Medtronic on a standalone basis and on Medtronic and Covidien combined, including the potential impact of such proposals on tax rates and access to non-U.S. cash. The Medtronic board of directors, management and the advisors also discussed that a proposed transaction with Covidien would be taxable to Medtronic shareholders and noted the impact that this tax would have on Medtronic shareholders, particularly long-term shareholders who are more likely to have a very low basis in their Medtronic stock as well as the impact on Medtronic’s reputation and business if Medtronic pursued a transaction that would result in its holding company being domiciled outside of the United States. In addition, representatives of Cleary Gottlieb noted that members of the Medtronic board of directors and certain members of Medtronic management could be subject to an additional excise tax imposed on directors and officers of companies that re-domicile from the United States to another jurisdiction, and that in a number of precedent transactions, the re-domiciling company indemnified the directors and officers for this tax, which had the effect of putting the directors and officers in the same tax position as if the excise tax, which is not applicable to other shareholders, had not been imposed. Representatives of Cleary Gottlieb noted that directors and officers of Medtronic would still be responsible for, and the indemnity described would not cover, any capital gains tax on the exchange of Medtronic common shares in the transaction, and Medtronic directors and officers would need to pay these amounts just like all other Medtronic shareholders. Representatives of Perella Weinberg then presented a preliminary financial analysis regarding a potential acquisition of Covidien, and the Medtronic board of directors engaged in a discussion of potential bidding strategies in light of the Perella Weinberg financial analysis and the magnitude of the estimated cost synergies. Members of the Medtronic board of directors asked questions and discussed the various presentations and related matters throughout the meeting and Medtronic management and representatives of Perella Weinberg and Cleary Gottlieb responded to comments and questions from the directors.

 

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Following the Covidien board meeting on May 22, 2014, Mr. Almeida called Mr. Ishrak to discuss the potential transaction. Mr. Almeida told Mr. Ishrak that Covidien has significant value as a stand-alone company and that Medtronic would need to offer a compelling premium in order for the Covidien board of directors to approve a transaction. In that regard, Mr. Almeida explained to Mr. Ishrak that the Covidien board of directors believed that the potential acquisition would create substantial strategic benefits for the combined company, and that the premium should account for these benefits. In addition, Mr. Almeida noted that the Covidien board of directors ascribed value to Covidien’s Irish domicile, and that the Covidien board believed that domiciling the combined company in Ireland would create incremental value in addition to the strategic benefits of a combination. Mr. Ishrak stated that, while he and the rest of the Medtronic board of directors were approaching the potential transaction on a basis generally consistent with what had been described by Mr. Almeida, they were still working through various considerations and he was not in a position to offer more feedback at that time. However, Mr. Ishrak reiterated that Medtronic expected to be in a position by the end of May to decide whether to propose and, if so, to propose, on a non-binding basis, a price and structure for a combination of the two companies.

On May 27, 2014, the Medtronic board of directors held a telephonic meeting attended by members of Medtronic management as well as representatives of Cleary Gottlieb and Perella Weinberg. Medtronic management reviewed with the Medtronic board of directors an updated transaction structure analysis and related financial analyses, including an analysis comparing illustrative scenarios in which Medtronic shareholders would hold different post-closing percentages of the combined company under alternative assumptions that there would be a U.S. domiciled or an Irish domiciled entity. The Medtronic board of directors, management and the advisors then discussed recent proposals for potential U.S. tax reform and the potential impact that such proposals might have on Medtronic on a standalone basis and on Medtronic and Covidien combined, including the potential impact of such proposals on tax rates and access to non-U.S. cash. Following extensive discussion, there was general consensus that a transaction that resulted in Medtronic shareholders owning 70% of the post-closing combined company, domiciled in Ireland, would be preferable from a financial point of view due to increased balance sheet flexibility and other factors, despite the minimal reduction in effective tax rate. Medtronic management and representatives of Cleary Gottlieb then reviewed with the Medtronic board of directors certain legal, diligence and other risks associated with the proposed transaction. Members of the Medtronic board of directors asked questions and discussed the presentations and related matters throughout the meeting and Medtronic management and representatives of Perella Weinberg and Cleary Gottlieb responded to comments and questions from the directors. Following discussion of the potential risks and benefits, the Medtronic board of directors unanimously concluded that the risks would likely be outweighed by the benefits and authorized management to continue its consideration of the proposed transaction.

On May 30, 2014, the Covidien board of directors held a telephonic meeting, attended by members of Covidien management, as well as representatives of Wachtell Lipton and Goldman Sachs. Members of Covidien management and representatives of Goldman Sachs updated the Covidien board of directors on their interactions with Medtronic and its advisors following the May 21, 2014 board meeting and the expectation that Medtronic would deliver a preliminary, non-binding proposal to acquire Covidien later that day. Members of Covidien’s management and representatives of Goldman Sachs reviewed with the Covidien board of directors an updated financial analysis of a potential transaction with Medtronic. Also at this meeting, a representative of Wachtell Lipton reviewed with the Covidien board of directors various matters relating to a potential acquisition of Covidien by Medtronic. Detailed discussions ensued throughout this meeting. At the conclusion of this meeting, the Covidien board of directors instructed members of Covidien management and representatives of Goldman Sachs to report back to the Covidien board of directors with Medtronic’s non-binding proposal once received, and planned to reconvene on May 31, 2014 in order to discuss and assess the offer and potential next steps.

On May 30, 2014, the Medtronic board of directors held a telephonic meeting, attended by members of Medtronic management, as well as representatives of Cleary Gottlieb and Perella Weinberg. Medtronic management reviewed with the Medtronic board of directors management’s proposed communications and integration strategy in the event the parties agreed to effect a transaction. Representatives of Medtronic

 

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management and Perella Weinberg and the Medtronic board of directors then discussed pricing considerations and, following extensive discussion, the Medtronic board of directors unanimously authorized Mr. Ishrak to present to Covidien a non-binding proposal of $90 per Covidien share (consisting of approximately $32.69 per Covidien share in cash and a fixed amount of stock having a then-current value of approximately $57.31 per share) in a transaction in which Medtronic’s shareholders would own approximately 70% of the combined company which would be domiciled in Ireland.

Following the Medtronic board meeting, Mr. Ishrak called Mr. Almeida to relay the non-binding proposal orally. Medtronic then delivered a preliminary, non-binding proposal letter to Covidien, in which Medtronic proposed to acquire Covidien for $90 per ordinary share on a fully diluted basis, consisting of the cash and stock mix discussed at the May 30, 2014 Medtronic board meeting as described above. It also noted that the proposal was subject to satisfactory completion of due diligence and negotiation of mutually acceptable definitive written agreements as well as receipt of board approvals of both companies.

On May 31, 2014, the Covidien board of directors held a telephonic meeting, attended by members of Covidien management and representatives of Wachtell Lipton and Goldman Sachs. Mr. Almeida described the details of Medtronic’s proposal to the Covidien board of directors, including the proposed consideration and the resulting percentage ownership of the combined company that Covidien shareholders would own immediately following closing. Thereafter, representatives of Goldman Sachs reviewed with the Covidien board of directors an updated financial analysis of a potential transaction with Medtronic, and the key terms and conditions contained in Medtronic’s offer, including price, the mix of cash and stock consideration, potential transaction structure and timing. Representatives of Goldman Sachs also reviewed key diligence items that would be necessary in order to better inform the Covidien board of directors and management about Medtronic’s view of the pro forma financial and operating metrics of the combined company. Representatives of Goldman Sachs also described to the Covidien board of directors the nature, scope and tone of Goldman Sachs’ follow-up discussion with Perella Weinberg after the receipt of the proposal, noting that the purpose of the discussion was to clarify certain points contained in Medtronic’s offer and to request follow-up information regarding Medtronic’s proposal. Detailed discussion ensued throughout this review. At the conclusion of the meeting, the Covidien board of directors instructed Goldman Sachs to contact Perella Weinberg to inform them that the offer, while constructive, undervalued Covidien and would need to be improved in order to warrant moving forward with negotiations regarding a potential transaction. Following the meeting, Goldman Sachs called Perella Weinberg to convey that message.

Later in the day on May 31, 2014, following discussions among Medtronic management and representatives of Perella Weinberg and Cleary Gottlieb, representatives of Perella Weinberg called representatives of Goldman Sachs to report that Medtronic management would not go back to the Medtronic board of directors to discuss the proposed transaction without specific guidance from Covidien regarding a proposal that the Covidien board of directors would be likely to find attractive. Also on May 31, 2014, representatives of Goldman Sachs requested, and Perella Weinberg provided on June 1, 2014 at Medtronic’s direction, additional data to facilitate Covidien’s evaluation of Medtronic’s non-binding proposal.

On June 1, 2014, the Covidien board of directors held a telephonic meeting, attended by members of Covidien management, as well as representatives of Wachtell Lipton and Goldman Sachs. Representatives of Goldman Sachs described the follow-up discussions with Perella Weinberg after receipt of the proposal. Representatives of Goldman Sachs also described to the Covidien board of directors the due diligence efforts undertaken by Covidien management and Goldman Sachs with respect to the additional data received from Medtronic and reviewed with the Covidien board of directors an updated financial analysis of a potential transaction with Medtronic. A discussion ensued regarding a response to Medtronic regarding valuation (including the mix of cash/stock consideration and factors to consider in computing the exchange ratio). After further discussion and review, the Covidien board of directors determined to make a preliminary, non-binding counter-proposal to Medtronic with a price per Covidien ordinary share between $94 and $95 and a mix of cash

 

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and stock and other terms on a basis reflecting the discussion at the meeting, and instructed Goldman Sachs to respond to Perella Weinberg with such non-binding counter proposal.

Following the Covidien board meeting, on June 1, 2014, representatives of Goldman Sachs discussed with representatives of Perella Weinberg Covidien’s response to the Medtronic proposal and informed them that the Covidien board of directors was prepared to move forward if Medtronic was willing to revise its prior non-binding proposal such that (i) the cash portion of the proposal was increased by $4 per Covidien ordinary share, and (ii) the exchange ratio was based on the 30-day volume weighted average trading price of Medtronic shares as of May 30, 2014 (which, together, would imply that the aggregate consideration to be paid to Covidien shareholders, based on the closing trading price of Medtronic stock on May 30, 2014, would be approximately $95 per ordinary share). Perella Weinberg stated that they would discuss the foregoing proposal with Medtronic.

On June 2, 2014, Mr. Ishrak called Mr. Almeida regarding Medtronic’s proposal and Covidien’s counterproposal. Mr. Ishrak indicated that Covidien’s counterproposal made on June 1, 2014 was beyond what he believed the Medtronic board of directors would be willing to pay. During the conversation, Mr. Ishrak and Mr. Almeida discussed whether there might be a price between Medtronic’s $90 per share proposal and Covidien’s counterproposal that each side might consider as a reasonable compromise. As part of this discussion, Mr. Ishrak indicated that he believed that the Medtronic board of directors would be supportive of a transaction that valued Covidien at $92 per Covidien ordinary share. Mr. Almeida stated that he believed that the Covidien board of directors might consider this too low and stated that he would be prepared to present to the Covidien board of directors a transaction that valued Covidien at $92.50 per Covidien ordinary share. At the conclusion of their discussion, Mr. Almeida and Mr. Ishrak agreed to present to their respective boards a proposed combination of the two companies at a price of $92.50 per Covidien ordinary share that would result in Medtronic shareholders owning approximately 70% of the combined company and Covidien shareholders owning approximately 30% of the combined company and otherwise consistent with the terms presented by Goldman Sachs. Shortly thereafter, Goldman Sachs and Perella Weinberg spoke to confirm the terms of the proposal discussed by Messrs. Almeida and Ishrak.

On June 2, 2014, following Mr. Almeida’s and Mr. Ishrak’s discussion, the Covidien board of directors held a telephonic meeting, attended by members of Covidien management and representatives of Wachtell Lipton and Goldman Sachs. Mr. Almeida reported to the Covidien board of directors that during a telephone conversation earlier in the afternoon, he and Mr. Ishrak reviewed Medtronic’s May 30, 2014 proposal and the feedback on that proposal that the Covidien board of directors had provided to Medtronic through Goldman Sachs’ conversation with Perella Weinberg. Mr. Almeida advised the Covidien board of directors that, based on his conversations with Mr. Ishrak, he expected that Medtronic would deliver a revised written non-binding cash and stock proposal with a value of $92.50 per share to Covidien the following day. Mr. Almeida then discussed matters relating to next steps in moving forward with a potential transaction with Medtronic should the Covidien board of directors decide to proceed, including determining the exchange ratio, the structure of the potential transaction and the timing to be in a position for final board approval to execute definitive transaction agreements. Detailed discussions ensued throughout this meeting. At the conclusion of the meeting, the Covidien board of directors instructed Covidien management and Covidien’s advisors to continue discussions and negotiations with Medtronic and requested that Mr. Almeida continue to keep the Covidien board of directors apprised of further discussions and developments with respect to a potential transaction with Medtronic.

On June 3, 2014, the Medtronic board of directors held a telephonic meeting, attended by members of Medtronic management, as well as representatives of Cleary Gottlieb and Perella Weinberg. Mr. Ishrak updated the Medtronic board of directors on interactions between Medtronic, Covidien and their respective advisors since the last meeting of the Medtronic board on May 30, 2014. Medtronic management then presented a comparative financial analysis of the proposed transaction at various prices, focusing on the proposed price of $92.50 per Covidien ordinary share based on the 30-day volume weighted average trading price for Medtronic shares. Representatives of Perella Weinberg then presented a preliminary financial analysis of the proposed transaction. Members of the Medtronic board of directors asked questions and discussed the presentations and related matters throughout the meeting and Medtronic management and representatives of Perella Weinberg and Cleary Gottlieb

 

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responded to comments and questions from the directors. Following extensive discussion of the Medtronic board of directors of the proposed terms, the Medtronic board unanimously expressed their approval of the proposed terms and authorized management and Medtronic’s advisors to continue to move forward with the transaction, including negotiation of other terms, completion of confirmatory due diligence and preparation for a public announcement.

On June 3, 2014, Medtronic delivered a revised non-binding proposal letter to Covidien, in which Medtronic proposed to acquire Covidien for consideration consisting of (i) $35.19 per ordinary share in cash and (ii) 0.956 shares of the combined company per Covidien ordinary share, which, taken together, was valued at approximately $92.50 per Covidien ordinary share using the 30-day volume weighted average trading price of Medtronic shares as of June 2, 2014. Based on the closing price of shares of Medtronic common stock on June 2, 2014, the consideration set forth in the proposal letter had a value of approximately $93.50 per Covidien ordinary share. The proposal letter indicated that Covidien’s shareholders would own approximately 30% of the combined company on a pro forma basis and also noted that the proposal was subject to satisfactory completion of due diligence and negotiation of mutually acceptable definitive written agreements as well as receipt of board approvals of both companies.

On June 4, 2014, members of the Medtronic and Covidien management teams, together with representatives of Perella Weinberg, Cleary Gottlieb, Goldman Sachs and Wachtell Lipton, met in person to discuss the proposed transaction, including the continued due diligence of both companies, the process for negotiating definitive agreements, integration planning and the strategy for post-signing communications and public relations with various constituencies. Particular topics of discussion included the appropriate timing and nature of post-signing communications to employees of both companies, and how best to present the shared vision for the future of the combined company; the possibility and consequences of a leak with respect to the ongoing negotiations, and how such an event should be handled; and the timeline and target for signing and announcing an agreement with respect to the potential transaction.

On June 5, 2014, Cleary Gottlieb sent Wachtell Lipton initial drafts of the proposed transaction agreement, expenses reimbursement agreement and conditions to the consummation of the proposed transaction. Over the course of the subsequent days, the parties and their respective advisors negotiated and exchanged drafts of these and other transaction-related documents. The negotiations primarily focused on issues relating to conditionality with respect to changes in tax laws that would undermine the anticipated tax treatment of the combined company and subject the combined company to additional unexpected tax costs, provisions with respect to regulatory approvals, provisions regarding each board’s ability to change its recommendation in favor of the transaction, provisions restricting the solicitation of alternative transaction proposals, the grounds for terminating the transaction agreement, the amount of the termination fee that Medtronic would be obligated to pay and the circumstances that would require such payment, the circumstances in which Covidien would be required to reimburse Medtronic for its expenses (subject to the one percent limit under Irish law as described elsewhere in this joint proxy statement/prospectus), the treatment of equity awards and other Covidien employee compensation and benefit matters, the composition of the combined company’s board of directors, and the interim operating covenants of both parties pending the consummation of the transaction.

On June 8, 2014, representatives of Covidien attended a meeting with representatives of Medtronic in Chicago, Illinois at which Medtronic gave a series of presentations regarding Medtronic’s portfolio, business strategy, product pipeline and financial outlook, including Medtronic’s view of the business prospects of the combined company should the proposed transaction be completed as contemplated. Following this meeting, representatives of Covidien and Medtronic conducted a series of follow-up due diligence calls with each other over the course of the week of June 9, 2014 regarding the business prospects of the combined company, in addition to other diligence activities regarding the two companies and the business prospects of the combined company should the transaction be completed.

On June 14, 2014, the Covidien board of directors held a meeting in Dublin, Ireland, attended by members of Covidien management, as well as representatives of Wachtell Lipton, Arthur Cox, Irish legal counsel to

 

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Covidien for the transaction, and Goldman Sachs, to consider the proposed terms and documentation for a proposed acquisition of Covidien by Medtronic. Mr. Almeida summarized for the Covidien board of directors the discussions with Medtronic and Medtronic’s advisors during the past two weeks and John H. Masterson, Covidien’s Senior Vice President and General Counsel, reviewed with the Covidien board of directors the due diligence efforts and procedures undertaken by Covidien in connection with the proposed transaction. Representatives of Wachtell Lipton and Arthur Cox discussed with the Covidien board of directors an overview of the duties of directors and the Irish Takeover Rules in the context of the proposed transaction with Medtronic and the key terms of the proposed transaction agreement, the expenses reimbursement agreement and the conditions to the consummation of the proposed transaction. In addition, a representative of Arthur Cox described to the Covidien board of directors the substance of the announcement required pursuant to Rule 2.5 of the Irish Takeover Rules in connection with the proposed transaction. Also at this meeting, representatives of Goldman Sachs reviewed for the Covidien board of directors its financial analysis of the proposed transaction. A discussion ensued throughout this meeting and members of Covidien management and representatives of Goldman Sachs, Wachtell Lipton and Arthur Cox responded to comments and questions from the Covidien board of directors. Following discussion, Goldman Sachs rendered to the Covidien board of directors its oral opinion, confirmed by delivery of a written opinion dated June 15, 2014, to the effect that as of that date and based upon and subject to the assumptions and limitations set forth in its opinion, the scheme consideration proposed to be paid to Covidien shareholders in the scheme was fair to the Covidien shareholders from a financial point of view. Goldman Sachs’ opinion is more fully described under the caption “The Transactions—Opinion of Covidien’s Financial Advisor” and the full text of the written opinion of Goldman Sachs, which sets forth the assumptions and limitations in such opinion, is attached as Annex F hereto. Following these presentations and discussions, the Covidien board of directors unanimously determined that the proposed transaction agreement and the transactions contemplated thereby, including the scheme, were advisable for, fair to and in the best interests of Covidien and the Covidien shareholders, and thereby approved the acquisition and determined that the terms of the scheme were fair and reasonable. Shortly thereafter, Mr. Almeida called Mr. Ishrak to advise him of the action by the Covidien board of directors.

On June 15, 2014, the Medtronic board of directors held a meeting at its headquarters in Minneapolis to consider the proposed transaction, attended by members of Medtronic management and representatives of Perella Weinberg, Cleary Gottlieb and A&L Goodbody, Irish legal counsel to Medtronic in connection with the transaction. Members of Medtronic management summarized for the Medtronic board of directors the economic terms of the proposed transaction negotiated by the companies’ management teams, the strategic and financial benefits of the transaction, the potential timeline to closing, the results of the due diligence performed with respect to Covidien, the contemplated financing arrangements, and the communications plan following an announcement, assuming board approval. Representatives of Cleary Gottlieb discussed the directors’ fiduciary duties in connection with considering the transaction, discussed the antitrust and competition law filing requirements, process and anticipated timing, summarized the transaction structure (noting that, as previously discussed, the transaction would be taxable to Medtronic shareholders) and the terms of the proposed transaction agreement, the expenses reimbursement agreement and the transaction conditions, and (together with representatives of A&L Goodbody) reviewed certain of the principal implications of New Medtronic being an Irish company. Cleary Gottlieb representatives also noted that the proposed transaction agreement permits Covidien to agree to indemnify Covidien directors and officers in the event that they were subject to the excise tax relating to transactions involving a re-domiciling company, and noted that, if the Medtronic board of directors approved the proposed transaction at that meeting, it would need to consider whether to provide an excise tax indemnity for Medtronic directors and officers so as to put them in the same position from a tax perspective as if the excise tax, which is not applicable to other shareholders, had not been imposed. Representatives of Cleary Gottlieb noted that these indemnification arrangements would not cover any capital gains tax incurred as a result of the exchange of Covidien or Medtronic shares in connection with the transaction, and that such directors and executive officers would be responsible for such capital gains tax just like all other shareholders. Also at this meeting, representatives of Perella Weinberg reviewed for the Medtronic board of directors its financial analysis of the proposed transaction and delivered Perella Weinberg’s oral opinion to the Medtronic board of directors, confirmed by delivery of a written opinion dated June 15, 2014, to the effect that as of that date and based upon

 

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and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth in its opinion, the consideration to be received by holders of Medtronic common stock in the transaction pursuant to the proposed transaction agreement (taking into account the acquisition of Covidien by New Medtronic) proposed to be received by holders of Medtronic common stock was fair, from a financial point of view, to the holders of Medtronic common stock (other than Medtronic and its subsidiaries). Perella Weinberg’s opinion is more fully described under the caption “The Transactions—Opinion of Medtronic’s Financial Advisor” and the full text of the written opinion of Perella Weinberg, which sets forth the assumptions and limitations in such opinion, is attached as Annex E hereto. Members of the Medtronic board of directors asked questions and discussed the various presentations and related matters throughout the meeting and Medtronic management, as well as representatives of Perella Weinberg, Cleary Gottlieb and A&L Goodbody responded to comments and questions from the directors. Following these presentations and discussions, the Medtronic board of directors unanimously determined that the transactions contemplated by the proposed transaction agreement were fair to and in the best interests of Medtronic and the Medtronic shareholders, and approved the execution of the proposed transaction agreement and resolved to recommend that Medtronic shareholders vote in favor of the adoption of the plan of merger contained in the proposed transaction agreement and approved a variety of other matters relating to the transaction, including the proposed excise tax indemnity. Subsequent to the approval by the Medtronic board of directors of the transaction, representatives of Brunswick Group LLC, communications advisor for Medtronic in connection with the transaction, joined the meeting and the Medtronic board of directors and Medtronic management engaged with them in a further discussion of the transaction communications strategy.

On June 15, 2014, following the conclusion of the Medtronic board meeting, Covidien and Medtronic executed the Transaction Agreement and the expenses reimbursement agreement and publicly announced the transaction and Medtronic issued its Rule 2.5 announcement pursuant to the Irish Takeover Rules.

On September 22, 2014, the U.S. Treasury Department and the IRS issued the IRS Notice announcing

their intention to issue regulations interpreting multiple sections of the Code, including Section 7874, to

address inversion transactions and transactions that Treasury and the IRS characterize as “post-inversion

tax avoidance transactions.”

On September 26, 2014, the Medtronic board of directors held a telephonic meeting, attended by members of Medtronic management, as well as representatives of Cleary Gottlieb and Perella Weinberg. Medtronic management reviewed with the Medtronic board of directors an overview of the IRS Notice and their preliminary views on the potential impact of the rules proposed in the IRS Notice on the transaction. The Medtronic board of directors, along with representatives of Medtronic management, Cleary Gottlieb and Perella Weinberg, then discussed certain terms and provisions of the Transaction Agreement, including Medtronic’s rights and obligations thereunder and potential steps that Medtronic could take to mitigate the potential impact to New Medtronic of the proposed rules. Following that discussion, the Medtronic board of directors instructed management to continue to evaluate the potential impact of the rules proposed in the IRS Notice in order to assist the board’s continuing consideration of what actions to take, if any, in response to the issuance of the IRS Notice.

On October 2, 2014, the Medtronic board of directors held a telephonic meeting, attended by members of Medtronic management, as well as representatives of Cleary Gottlieb and Perella Weinberg. Medtronic management further reviewed the potential impact of the rules proposed in the IRS Notice with the Medtronic board of directors and recommended to the Medtronic board of directors that Medtronic incur external indebtedness to finance the cash component of the scheme consideration payable to Covidien’s shareholders, rather than using cash from its foreign subsidiaries as previously planned, in order to mitigate the potential impact of the proposed rules. The Medtronic board of directors, along with representatives of Medtronic management, then discussed Medtronic management’s proposal and the expected impact to New Medtronic of the recommended use of external financing. The Medtronic board of directors then discussed certain terms and provisions of the Transaction Agreement, including Medtronic’s rights and obligations thereunder. Following that discussion, representatives of Perella Weinberg confirmed that the proposed new financing would not have

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Medtronic board of directors as of June 15, 2014 in connection with the transaction. All members of the Medtronic board of directors present unanimously expressed their approval of Medtronic’s use of external indebtedness to finance the cash component of the scheme consideration and affirmed the board’s continued support of the transaction.

Recommendation of the Medtronic Board of Directors and Medtronic’s Reasons for the Transaction

At its meeting on June 15, 2014, the Medtronic board of directors unanimously approved the plan of merger contained in the Transaction Agreement and determined that the entry into the Transaction Agreement and the merger are fair to and in the best interests of Medtronic and its shareholders. The Medtronic board of directors unanimously recommends that the shareholders of Medtronic vote for the approval of the plan of merger contained in the Transaction Agreement and the revised memorandum and articles of association of New Medtronic and for the other resolutions at the Medtronic special meeting.

At its meeting on June 15, 2014, the Medtronic board of directors considered many factors in making its determination that the entry into the Transaction Agreement and the merger are fair to and in the best interests of Medtronic and its shareholders and recommending approval of the plan of merger contained in the Transaction Agreement and the other resolutions by the Medtronic shareholders at the Medtronic special meeting. In arriving at its determination on June 15, 2014, the Medtronic board of directors consulted with Medtronic’s management, legal advisors and financial advisor, reviewed a significant amount of information, considered a number of factors in its deliberations and concluded that the transaction is likely to result in significant strategic and financial benefits to Medtronic and its shareholders, including:

 

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The belief that the combination will support and accelerate Medtronic’s three fundamental strategies:

 

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Therapy Innovation: With its expanded portfolio of innovative products and services and ability to accelerate strategic investments and investments in technology, New Medtronic would be a preeminent leader in developing, investing in and delivering therapy and procedural innovations to address the major disease states impacting patients and healthcare costs in the United States and around the world;

 

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Globalization: With a presence in more than 150 countries, the combined entity would be better able to serve global market needs. Medtronic and Covidien have combined pro forma revenues of approximately $27 billion including approximately $13 billion from outside the U.S., of which $3.7 billion comes from emerging markets. Covidien’s extensive capabilities in emerging market R&D and manufacturing, joined with Medtronic’s demonstrated clinical expertise across a much broader product offering, significantly increases the number of attractive solutions the new company would be able to offer globally; and

 

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Economic Value: Medtronic has adopted an intense focus on aligning with its customers to create more value in healthcare systems around the world by combining products, services and insights into solutions aimed at expanding access and reducing healthcare costs. With Covidien, Medtronic would be able to provide a broader array of complementary therapies and solutions that can be packaged to drive more value and efficiency in healthcare systems;

 

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the belief that the combination will also result in the diversification of Medtronic’s revenue base due to a stronger foundation in emerging market R&D and manufacturing and the addition of industry leading capabilities and expertise in general and advanced surgery and patient monitoring;

 

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the belief that, since the transaction would be expected to support and accelerate Medtronic’s three fundamental strategies, diversify Medtronic’s revenue base, and for the other reasons considered by the Medtronic board of directors, the transaction will result in enhanced value for Medtronic shareholders relative to Medtronic continuing as a standalone company;

 

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the opportunities to employ the best practices of each company to drive greater efficiencies, and from realization of economies in purchasing due to the greater scale of New Medtronic;

 

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the belief that the Medtronic management team, working together with members of Covidien management, will be able to successfully integrate the two companies;

 

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the anticipated aggregate annual pre-tax cost synergies of at least $850 million by the end of Medtronic’s fiscal year 2018, with additional possible revenue synergies, as more fully described in the section “Merger Benefit Statement” beginning on page 477;

 

•

the ability of New Medtronic, as an Irish-domiciled company, to access substantially all of Covidien’s cash on a going-forward basis, and to accelerate strategic investments and investments in technology in the U.S.;

 

•

the expectation that the combined company’s effective tax rate will be reduced by about one to two percentage points compared with the companies’ estimated blended rate; and

 

•

the anticipated strong credit profile of the combined company, with increased earnings and cash flow and better access to capital markets as a result of enhanced size and business diversification despite a potential ratings downgrade as a result of the transaction.

These beliefs are based in part on the following factors that the Medtronic board of directors considered:

 

•

its knowledge and understanding of the Medtronic business, operations, financial condition, earnings, strategy and future prospects;

 

•

information and discussions with Medtronic’s management, in consultation with Perella Weinberg, regarding Covidien business, operations, financial condition, earnings, strategy and future prospects, and the results of Medtronic’s due diligence review of Covidien;

 

•

the fact that the board of directors of New Medtronic following completion of the transaction would consist of up to 11 Medtronic directors then in office plus two members of the Covidien board of directors to be selected by the Nominating and Corporate Governance Committee of the Medtronic board of directors in consultation with Covidien, and that senior management of Medtronic would become the senior management of New Medtronic;

 

•

the current and prospective economic climate generally and the competitive climate in the medical device and supplies industries, including the potential for further consolidation;

 

•

the opinion of Perella Weinberg rendered to the Medtronic board of directors that, as of June 15, 2014, and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth in its written opinion, the merger consideration of one New Medtronic ordinary share to be received for each share of Medtronic common stock (taking into account the acquisition) as provided for in the Transaction Agreement was fair, from a financial point of view, to the holders of Medtronic common stock (other than Medtronic and its subsidiaries), and the related presentation and financial analysis of Perella Weinberg provided to the board of directors of Medtronic in connection with the rendering of its opinion, as more fully described in the section entitled “—Opinion of Medtronic’s Financial Advisor”;

 

•

the likelihood that the transaction will be completed on a timely basis and the belief that antitrust and competition clearances could be obtained without the imposition of conditions that would be materially adverse to the combined company;

 

•

the limited number and nature of the conditions to Covidien’s obligation to complete the transaction;

 

•

the fact that the Medtronic board of directors may change its recommendation to Medtronic’s shareholders in response to a material event that was not known to it as of the date of the Transaction Agreement, subject to certain limitations, if the Medtronic board of directors has concluded in good faith (after consultation with Medtronic’s outside legal counsel and financial advisor) that the failure to take such action would be inconsistent with the directors’ fiduciary duties;

 

•

the fact that the transaction is subject to approval by the Medtronic shareholders;

 

•

that, subject to certain limited exceptions, Covidien is prohibited from soliciting, participating in any discussions or negotiations with respect to, providing information to any third party with respect to, or entering into any agreement providing for, the acquisition of Covidien;

 

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that Covidien must reimburse certain of Medtronic’s expenses in connection with the transaction in an amount up to 1% of the equity value of Covidien if the Transaction Agreement is terminated under the circumstances specified in the expenses reimbursement agreement;

 

•

the fact that Medtronic’s obligation to consummate the transaction is subject to a condition that there shall have been no change in applicable law (whether or not such change in law is yet effective) with respect to Section 7874 of the U.S. Code (or any other U.S. tax law), or any official interpretations thereof as set forth in published guidance by the IRS (other than IRS News Releases) (whether or not such change in official interpretation is yet effective), and there having been no bill that would implement such a change which has been passed in identical (or substantially identical such that a conference committee is not required prior to submission of such legislation for the President’s approval or veto) form by both houses of Congress and for which the time period for the President of the United States to sign or veto such bill has not yet elapsed, in each case, that, once effective, in the opinion of nationally recognized U.S. tax counsel, would cause New Medtronic to be treated as a U.S. domestic corporation for U.S. federal income tax purposes; and

 

•

the fixed exchange ratio for the acquisition of Covidien will not be increased to compensate Covidien shareholders in the event of a decrease in the share price of Medtronic’s common stock prior to the effective time, and the terms of the Transaction Agreement do not include termination rights for Covidien triggered in the event of an increase in the value of Covidien relative to the value of Medtronic.

The Medtronic board of directors weighed these factors against a number of uncertainties, risks and potentially negative factors relevant to the transaction, including the following:

 

•

the fixed exchange ratio for the acquisition of Covidien will not be reduced in the event of an increase in the share price of Medtronic’s common stock prior to the effective time, and the terms of the Transaction Agreement do not include termination rights for Medtronic triggered in the event of a decrease in the value of Covidien relative to the value of Medtronic;

 

•

the adverse impact that business uncertainty prior to the closing of the transaction and during the post-closing integration period could have on the ability of both Medtronic and Covidien to attract, retain and motivate key personnel;

 

•

the challenges inherent in the combination of two business enterprises of the size and scope of Medtronic and Covidien, including the possibility that the anticipated cost savings and synergies and other benefits sought to be obtained from the transaction might not be achieved in the time frame contemplated or at all and the other numerous risks and uncertainties which could adversely affect New Medtronic’s operating results;

 

•

the risk that the forecasted results in the unaudited prospective financial information of Medtronic and Covidien would not be achieved in the amounts or at the times anticipated;

 

•

the risk that a change in applicable law with respect to Section 7874 of the Code or any other U.S. tax law, or official interpretations thereof, could cause New Medtronic to be treated as a U.S. domestic corporation for U.S. federal income tax purposes following the consummation of the transaction or otherwise adversely affect New Medtronic;

 

•

that the merger is expected to be taxable for U.S. federal income tax purposes to the Medtronic shareholders, which could particularly affect long-term Medtronic shareholders with a low basis in their shares and could, among other things, lead them to sell some of their shares to provide the cash to pay the tax;

 

•

the risk of negative effects on Medtronic’s reputation among various stakeholders based on the fact that New Medtronic would be an Irish-domiciled company;

 

•

the risk that the transaction might not be consummated in a timely manner or at all;

 

•

that failure to complete the transaction could cause Medtronic to incur significant fees and expenses and could lead to negative perceptions among investors, potential investors and customers;

 

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the limited circumstances under which Medtronic could terminate the Transaction Agreement or refuse to consummate the transaction;

 

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that, subject to certain limited exceptions, Medtronic is prohibited during the term of the Transaction Agreement from soliciting, participating in any discussions or negotiations with respect to, providing information to any third party with respect to, or entering into any agreement providing for, the acquisition of Medtronic and that Medtronic is prohibited from terminating the Transaction Agreement to enter into any agreement providing for the acquisition of Medtronic;

 

•

the risk that, pursuant to the terms of the Transaction Agreement, Medtronic may become obligated to pay a termination fee of $850 million if the Transaction Agreement is terminated under certain circumstances specified in the Transaction Agreement;

 

•

that Medtronic is limited to recovering its documented, specific and quantifiable third-party costs and expenses from Covidien in an amount up to 1% of the equity value of Covidien if the Transaction Agreement is terminated under the circumstances specified in the expenses reimbursement agreement;

 

•

the restrictions on Medtronic’s operations until completion of the transaction which could have the effect of preventing Medtronic from pursuing other strategic transactions during the pendency of the Transaction Agreement as well as taking certain other actions relating to the conduct of its business without the prior consent of Covidien; and

 

•

the risks of the type and nature described under the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.”

At its meeting on June 15, 2014, the Medtronic board of directors concluded that the uncertainties, risks and potentially negative factors relevant to the transaction were outweighed by the potential benefits that it expected Medtronic and the Medtronic shareholders would achieve as a result of the transaction.

In arriving at its determination on October 2, 2014 to approve Medtronic’s use of external indebtedness to finance the cash component of the scheme consideration and to affirm its continued support of the transaction, the Medtronic board of directors consulted with Medtronic’s management, legal advisors and financial advisor, reviewed a significant amount of information, considered a number of factors in its deliberations and concluded that the transaction remained likely to result in significant strategic and financial benefits to Medtronic and its shareholders for the reasons set forth above. Its determination was based in part on the following factors that the Medtronic board of directors considered:

 

•

the continued belief in the strategic benefits of the transaction;

 

•

the potential impact of the proposed rules described in the IRS Notice;

 

•

the anticipated financial impact of the proposed use of external indebtedness to finance the cash component of the scheme consideration as compared to the anticipated financial impact of the intercompany financing structure that had been expected to be utilized prior to the issuance of the IRS Notice;

 

•

the fact that by virtue of their post-closing ownership of New Medtronic, former Medtronic shareholders would bear 70%, and former Covidien shareholders would bear 30%, of any potential adverse impact arising from the proposed rules described in the IRS Notice;

 

•

Medtronic’s rights under the Transaction Agreement relevant to the Medtronic board of directors’ consideration of the IRS Notice; and

 

•

Perella Weinberg’s confirmation that the proposed new financing would not have impacted the financial analysis used by Perella Weinberg in rendering its fairness opinion delivered to the Medtronic board of directors as of June 15, 2014 in connection with the transaction.

In considering the recommendation of the Medtronic board of directors, Medtronic shareholders should be aware that directors and executive officers of Medtronic have interests in the proposed transaction that are different from, or in addition to, any interests they might have as shareholders. See “—Interests of Certain Persons in the Transaction—Medtronic” beginning on page 125 of this joint proxy statement/prospectus.

 

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This discussion of the information and factors considered by the Medtronic board of directors includes the principal positive and negative factors considered by the Medtronic board of directors, but is not intended to be exhaustive and may not include all of the factors considered by the Medtronic board of directors. In view of the wide variety of factors considered in connection with its evaluation of the transaction, and the complexity of these matters, the Medtronic board of directors did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the transaction and to make its recommendations to the Medtronic shareholders. Rather, the Medtronic board of directors viewed its decisions as being based on the totality of the information presented to it and the factors it considered. In addition, individual members of the Medtronic board of directors may have given differing weights to different factors.

Recommendation of the Covidien Board of Directors and Covidien’s Reasons for the Transaction

At its meeting on June 14, 2014 in Dublin, Ireland, the members of the Covidien board of directors unanimously determined that the Transaction Agreement and the transaction contemplated thereby, including the scheme, were advisable for, fair to and in the best interests of Covidien and the Covidien shareholders, and that the terms of the scheme were fair and reasonable. The Covidien board of directors unanimously recommends that the shareholders of Covidien vote in favor of the scheme at the special Court-ordered meeting and in favor of the scheme and other resolutions at the EGM.

In evaluating the Transaction Agreement and the proposed transaction, the Covidien board of directors consulted with management, as well as Covidien’s internal and outside legal counsel and its financial advisor, and considered a number of factors, weighing both perceived benefits of the transaction as well as potential risks of the transaction.

The Covidien board of directors considered the following factors that it believes support its determinations and recommendations:

Aggregate Value and Composition of the Consideration

 

•

that the scheme consideration had an implied value per Covidien ordinary share of $93.22, based on the closing price of Medtronic shares as of June 13, 2014 (the last trading day prior to announcement of the transaction), which represented a 29.4% premium to the closing price per Covidien ordinary share on the same date, which the Covidien board of directors viewed as an attractive valuation relative to other transactions and peer comparisons;

 

•

that the equity component of the scheme consideration offers Covidien shareholders the opportunity to participate in the future earnings and growth of the combined company, while the cash portion of the scheme consideration provides Covidien shareholders with immediate certainty of value;

 

•

that the fixed exchange ratio provides certainty to the Covidien shareholders as to their pro forma percentage ownership of approximately 30% of the combined company;

Synergies and Strategic Considerations

 

•

the potential for Covidien shareholders, as shareholders of the combined company, to benefit to the extent of their interest in the combined company from the synergies expected to result from the transaction, which are projected to be at least $850 million (on a pre-tax basis) by the end of New Medtronic’s fiscal year 2018;

 

•

the belief of the Covidien board of directors that the combined company will have a comprehensive product portfolio, a diversified growth profile and broad geographic reach;

 

•

the Covidien board of directors’ familiarity with and understanding of Covidien’s business, results of operations, financial and market position, and its expectations concerning Covidien’s future prospects;

 

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information and discussions with Covidien’s management, in consultation with Goldman Sachs, regarding Medtronic’s business, results of operations, financial and market position, and Medtronic management’s expectations concerning Covidien’s business prospects, and historical and current trading prices of Medtronic shares;

 

•

information and discussions regarding the benefits of size and scale, the expected credit profile and effective tax rate of the combined company and the expected pro forma effect of the proposed transaction;

 

•

the Covidien board of directors’ ongoing evaluation of strategic alternatives for maximizing shareholder value over the long term, including senior management’s standalone plan, and the potential risks, rewards and uncertainties associated with such alternatives, and the Covidien board’s belief that the proposed transaction with Medtronic was the most attractive option available to Covidien shareholders;

 

•

the perceived benefits of New Medtronic being organized under the laws of Ireland, including the significant global cash management flexibility of the combined company;

Opinion of Financial Advisor

 

•

the opinion of Goldman Sachs to the Covidien board of directors that, as of June 15, 2014 and based upon and subject to the assumptions and limitations set forth therein, the scheme consideration is fair to the Covidien shareholders (other than Medtronic and its affiliates) from a financial point of view, together with the financial analyses presented by Goldman Sachs to the Covidien board of directors in connection with the delivery of the opinion, as further described under “—Opinion of Covidien’s Financial Advisor”;

Likelihood of Completion of the Transaction

 

•

the likelihood that the transaction will be consummated, based on, among other things:

 

•

the closing conditions to the scheme and acquisition, including the fact that the obligations of Medtronic are not subject to a financing condition;

 

•

that Medtronic has obtained committed debt financing for the transaction from a reputable financing source in accordance with the “funds certain” requirement of the Irish Takeover Rules; and

 

•

the commitment made by Medtronic to cooperate and use reasonable best effort to obtain regulatory clearances, including under the HSR Act and the EC Merger Regulation, including to divest assets or commit to limitations on the businesses of Covidien and Medtronic to the extent provided in the Transaction Agreement, as discussed further under “The Transaction—Regulatory Approvals Required”;

Favorable Terms of the Transaction Agreement and Expenses Reimbursement Agreement

 

•

the terms and conditions of the Transaction Agreement and the expenses reimbursement agreement and the course of negotiations of such agreements, including, among other things:

 

•

the ability of Covidien, under certain circumstances, to provide information to and to engage in discussions or negotiations with a third party that makes an unsolicited acquisition proposal, as further described under “The Transaction Agreement—Covenants and Agreements”;

 

•

the ability of the Covidien board of directors, under certain circumstances, to change its recommendation to Covidien shareholders concerning the scheme, as further described under “The Transaction Agreement—Covenants and Agreements”;

 

•

the ability of the Covidien board of directors to terminate the Transaction Agreement under certain circumstances, including to enter into an agreement providing for a superior proposal, subject to certain conditions (including payment of an expense reimbursement to Medtronic and certain rights of Medtronic giving it the opportunity to match the superior proposal), as further described under “The Transaction Agreement—Covenants and Agreements”;

 

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the terms of the Transaction Agreement that restrict Medtronic’s ability to solicit alternative business combination transactions and to provide confidential due diligence information to, or engage in discussions with, a third party interested in pursuing an alternative business combination transaction, as further discussed under “The Transaction Agreement—Covenants and Agreements”;

 

•

the obligation of Medtronic to pay Covidien a termination fee of $850 million upon termination of the Transaction Agreement under specified circumstances;

 

•

the requirement that Medtronic hold a shareholder vote on the Transaction Agreement, even though the Medtronic board of directors may have withdrawn or changed its recommendation, and the inability of Medtronic to terminate the Transaction Agreement to enter into an agreement for a superior proposal;

 

•

the Covidien board of directors’ belief that the expenses reimbursement payment to be made to Medtronic upon termination of the Transaction Agreement under specified circumstances, which is capped at an amount equal to 1% of the total value attributable to the entire issued share capital of Covidien under the acquisition, is much less of a financial impediment to another party making a superior acquisition proposal after execution of the Transaction Agreement than is typical in U.S. transactions, which customarily provide for a fixed break-up fee of a substantially greater amount, and is not likely to significantly deter another party from making such an acquisition proposal; and

 

•

the governance arrangements contained in the Transaction Agreement, which provide that, after completion of the scheme, the board of directors of New Medtronic will consist of no more than eleven individuals who are members of the Medtronic board of directors immediately prior to the completion of the transaction and two individuals who are members of the Covidien board of directors immediately prior to the completion of the transaction, to be selected by the Nominating and Corporate Governance Committee of the Medtronic board of directors in consultation with Covidien.

The Covidien board of directors also considered a variety of risks and other countervailing factors, including:

Taxable Transaction

 

•

that the scheme will be a fully taxable transaction for Covidien shareholders for U.S. federal income tax purposes;

Fluctuations in Share Price

 

•

that the fixed exchange ratio will not adjust downwards to compensate for changes in the price of Covidien or Medtronic shares prior to the consummation of the transaction, and the terms of the Transaction Agreement do not include termination rights triggered by a decrease in the value of Medtronic relative to the value of Covidien (although the Covidien board of directors determined that the exchange ratio was appropriate and the risks acceptable in view of the relative intrinsic values and financial performance of Covidien and Medtronic and the historic trading prices of Covidien and Medtronic shares);

Limitations on Covidien’s Business Pending Completion of the Transaction

 

•

the restrictions on the conduct of Covidien’s business during the pendency of the transaction, which may delay or prevent Covidien from undertaking business opportunities that may arise or may negatively affect Covidien’s ability to attract and retain key personnel;

 

•

the terms of the Transaction Agreement that restrict Covidien’s ability to solicit alternative business combination transactions and to provide confidential due diligence information to, or engage in discussions with, a third party interested in pursuing an alternative business combination transaction, as further discussed under “The Transaction Agreement—Covenants and Agreements,” although the Covidien board of directors believed that such terms were reasonable and not likely to significantly deter another party from making a superior acquisition proposal;

 

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Possible Disruption of Covidien’s Business

 

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the potential for diversion of management and employee attrition and the possible effects of the announcement and pendency of the transaction on customers and business relationships;

Risks of Delays or Non-Completion

 

•

the amount of time it could take to complete the transaction, including the fact that completion of the transaction depends on factors outside of Covidien’s control, and that there can be no assurance that the conditions to the transaction will be satisfied even if the scheme is approved by Covidien shareholders;

 

•

the possibility of non-consummation of the transaction and the potential consequences of non-consummation, including the potential negative impacts on Covidien, its business and the trading price of its shares;

Uncertainties Following Completion

 

•

the difficulty and costs inherent in integrating diverse, global businesses and the risk that the cost savings, synergies and other benefits expected to be obtained as a result of the transaction might not be fully or timely realized; and

Other Risks

 

•

the risks of the type and nature described under the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward Looking Statements.”

The Covidien board of directors concluded that the uncertainties, risks and potentially negative factors relevant to the transaction were outweighed by the potential benefits that it expected Covidien and its shareholders would achieve as a result of the transaction.

In considering the recommendation of the Covidien board of directors, you should be aware that directors and executive officers of Covidien have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. See “—Interests of Certain Persons in the Transaction” beginning on page 125.

This discussion of the information and factors considered by the Covidien board of directors includes the principal positive and negative factors considered by the Covidien board of directors, but is not intended to be exhaustive and may not include all of the factors considered by the Covidien board of directors. In view of the wide variety of factors considered in connection with its evaluation of the transaction, and the complexity of these matters, the Covidien board of directors did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the transaction and to make its recommendations to the Covidien shareholders. Rather, the Covidien board of directors viewed its decisions as being based on the totality of the information presented to it and the factors it considered. In addition, individual members of the Covidien board of directors may have given differing weights to different factors.

Opinion of Medtronic’s Financial Advisor

The Medtronic board of directors retained Perella Weinberg to act as its financial advisor in connection with the transaction. The board of directors selected Perella Weinberg based on Perella Weinberg’s qualifications, expertise and reputation and its knowledge of the business and affairs of Medtronic and Covidien and the industries in which Medtronic and Covidien conduct their respective businesses. Perella Weinberg, as part of its investment banking business, is continually engaged in performing financial analyses with respect to businesses and their securities in connection with mergers and acquisitions, leveraged buyouts and other transactions as well as for corporate and other purposes.

 

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On June 15, 2014, Perella Weinberg rendered its oral opinion, subsequently confirmed in writing, to the Medtronic board of directors that, as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth therein, the merger consideration of one New Medtronic share to be received for each share of Medtronic common stock (taking into account the acquisition of Covidien) as provided for in the Transaction Agreement was fair, from a financial point of view, to the holders of Medtronic common stock (other than Medtronic and its subsidiaries).

The full text of Perella Weinberg’s written opinion, dated June 15, 2014, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the review undertaken by Perella Weinberg, is attached as Annex E and is incorporated by reference herein. Holders of Medtronic common stock are urged to read Perella Weinberg’s opinion carefully and in its entirety. The opinion does not address Medtronic’s underlying business decision to enter into the transaction or the relative merits of the transaction as compared with any other strategic alternative that may have been available to Medtronic. The opinion does not constitute a recommendation to any holder of Medtronic common stock or Covidien ordinary shares as to how such holder should vote or otherwise act with respect to the transaction or any other matter and does not in any manner address the prices at which Medtronic common stock or Covidien ordinary shares will trade at any time. In addition, Perella Weinberg expressed no opinion as to the fairness of the transaction, or any consideration received in connection with the transaction, to the holders of any other class of securities, creditors or other constituencies of Medtronic. Perella Weinberg provided its opinion for the information and assistance of the Medtronic board of directors in connection with, and for the purposes of its evaluation of, the transaction. This summary is qualified in its entirety by reference to the full text of the opinion.

On October 2, 2014, representatives of Perella Weinberg confirmed that the changes to the proposed financing, as described in “The Transaction—Financing” beginning on page 123 of this joint proxy statement/prospectus, would not have impacted the financial analysis used by Perella Weinberg in rendering its fairness opinion delivered to the Medtronic board of directors as of June 15, 2014 in connection with the transaction.

In arriving at its opinion, Perella Weinberg, among other things:

 

•

reviewed certain publicly available financial statements and other business and financial information with respect to Covidien and Medtronic, including research analyst reports;

 

•

reviewed certain publicly available financial projections concerning the business and financial prospects of Covidien and Medtronic (which we refer to in this section as the “Public Forecasts”);

 

•

reviewed certain internal analyses and forecasts (which we refer to in this section as the “Medtronic Forecasts”), and other financial and operating data relating to the business of Medtronic, in each case, prepared by the management of Medtronic;

 

•

reviewed certain internal analyses and forecasts (which we refer to in this section as the “Covidien Forecasts”), and other financial and operating data relating to the business of Covidien, in each case, prepared by management of Covidien and provided to Perella Weinberg by management of Medtronic;

 

•

reviewed an alternative version of the Covidien Forecasts incorporating certain adjustments thereto made by the management of Medtronic (which we refer to in this section as the “Adjusted Covidien Forecasts”), and discussed with the management of Medtronic its assessments as to the relative likelihood of achieving the future financial results reflected in the Covidien Forecasts and the Adjusted Covidien Forecasts;

 

•

reviewed information relating to certain operational and financial benefits anticipated to result from the consummation of the transaction (which we refer to in this section as the “Anticipated Synergies”), in each case, prepared by the management of Medtronic;

 

•

discussed the past and current operations, financial condition and prospects of Covidien and Medtronic, including information relating to the Anticipated Synergies, with the management of Medtronic;

 

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compared the financial performance of Covidien and Medtronic with that of certain publicly-traded companies which Perella Weinberg believed to be generally relevant;

 

•

compared the financial terms of the transaction with the publicly available financial terms of certain transactions which Perella Weinberg believed to be generally relevant;

 

•

reviewed the potential pro forma financial impact of the transaction on Medtronic;

 

•

reviewed the historical trading prices and trading activity for Covidien ordinary shares and Medtronic common stock and compared such price and trading activity of Covidien ordinary shares and Medtronic common stock with that of securities of certain publicly-traded companies which Perella Weinberg believed to be generally relevant;

 

•

participated in discussions among representatives of Covidien and Medtronic and their respective financial and legal advisors;

 

•

reviewed a draft dated June 15, 2014 of the Transaction Agreement, a draft dated June 15, 2014 of the expenses reimbursement agreement and a draft dated June 15, 2014 of the Rule 2.5 Announcement, and certain other documents; and

 

•

conducted such other financial studies, analyses and investigations, and considered such other factors, as Perella Weinberg deemed appropriate.

In arriving at its opinion, Perella Weinberg assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information supplied or otherwise made available to Perella Weinberg (including information that was available from generally recognized public sources) for purposes of its opinion and further assumed, with the consent of Medtronic, that the information furnished by the managements of Medtronic and Covidien for purposes of its analysis did not contain any material omissions or misstatements of material fact. With respect to the Medtronic Forecasts, Perella Weinberg was advised by the management of Medtronic and assumed, with the consent of Medtronic, that such forecasts were reasonably prepared on bases reflecting the best estimates available at the time and the good faith judgments of the management of Medtronic as to the future financial performance of Medtronic and the other matters covered thereby and Perella Weinberg expressed no view as to the assumptions on which they were based. With respect to the Covidien Forecasts, Perella Weinberg assumed, with the consent of Medtronic, that such forecasts were reasonably prepared on bases reflecting the best estimates available at the time and the good faith judgments of the management of Covidien as to the future financial performance of Covidien and the other matters covered thereby and Perella Weinberg expressed no view as to the assumptions on which they were based. With respect to the Adjusted Covidien Forecasts, Perella Weinberg assumed, with the consent of Medtronic, that such forecasts were reasonably prepared on bases reflecting the best estimates available at the time and the good faith judgments of the management of Medtronic as to the future financial performance of Covidien and the other matters covered thereby and Perella Weinberg expressed no view as to the assumptions on which they were based. Based on the assessments of the management of Medtronic as to the relative likelihood of achieving the future financial results reflected in the Covidien Forecasts and the Adjusted Covidien Forecasts, Perella Weinberg used, at the direction of Medtronic, the Adjusted Covidien Forecasts for purposes of its opinion. While senior executives of Covidien presented their views to Perella Weinberg on the past and current business, operations, financial condition and prospects of Covidien, Perella Weinberg did not have discussions with management of Covidien on these matters. Perella Weinberg assumed, with the consent of Medtronic, that the Anticipated Synergies (including the amount, timing and achievability thereof) would be realized in the amounts and at the times projected by the management of Medtronic, and Perella Weinberg expressed no view as to the assumptions on which the Anticipated Synergies were based. Perella Weinberg relied without independent verification upon the assessments by the management of Medtronic of the timing and risks associated with the integration of Medtronic and Covidien. In arriving at its opinion, Perella Weinberg did not make any independent valuation or appraisal of the assets or liabilities (including any contingent, derivative or off-balance-sheet assets and liabilities) of Covidien or Medtronic, nor was Perella Weinberg furnished with any such valuations or appraisals, nor did Perella Weinberg assume any obligation to conduct, nor did Perella Weinberg conduct, any physical

 

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inspection of the properties or facilities of Medtronic or Covidien. In addition, Perella Weinberg did not evaluate the solvency of any party to the Transaction Agreement, including under any state or federal laws relating to bankruptcy, insolvency or similar matters. Perella Weinberg assumed that the final transaction documents would not differ in any material respect from the draft transaction documents reviewed by Perella Weinberg and that the transaction would be consummated in accordance with the terms set forth in such transaction documents, without material modification, waiver or delay. In addition, Perella Weinberg assumed that in connection with the receipt of all the necessary approvals of the transaction, no delays, limitations, conditions or restrictions will be imposed that could have an adverse effect on Medtronic, Covidien, or their respective affiliates, or the contemplated benefits expected to be derived in the transaction. Perella Weinberg relied as to all legal matters relevant to rendering its opinion upon the advice of its counsel.

Perella Weinberg’s opinion addressed only the fairness from a financial point of view, as of the date thereof, of the merger consideration of one New Medtronic share to be received for each share of Medtronic common stock (taking into account the acquisition of Covidien) as provided for in the Transaction Agreement to the holders of Medtronic common stock (other than Medtronic and its subsidiaries). Perella Weinberg was not asked to, nor did it, offer any opinion as to any other term of the transaction documents or the form or structure of the transaction or the likely timeframe in which the transaction would be consummated. In addition, Perella Weinberg expressed no opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the transaction, or any class of such persons, whether relative to the consideration to be received by the holders of Medtronic common stock (other than Medtronic or any of its subsidiaries) in the merger or otherwise. Perella Weinberg did not express any opinion as to any tax or other consequences that may result from the transaction or the likelihood of any change in tax law or the consequences of any such change or any mitigation in respect thereof by the parties to the Transaction Agreement. In addition, Perella Weinberg’s opinion did not address any legal, tax, regulatory or accounting matters, as to which Perella Weinberg relied on the assessments made by Medtronic and its advisors and as to which Perella Weinberg understood Medtronic had received such advice as Medtronic deemed necessary from qualified professionals. Perella Weinberg’s opinion did not address the underlying business decision of Medtronic to enter into the transaction or the relative merits of the transaction as compared with any other strategic alternative which may have been available to Medtronic.

Perella Weinberg’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Perella Weinberg as of, the date of its opinion. It should be understood that subsequent developments may affect Perella Weinberg’s opinion and the assumptions used in preparing it, and Perella Weinberg does not have any obligation to update, revise, or reaffirm its opinion. The issuance of Perella Weinberg’s opinion was approved by a fairness committee of Perella Weinberg.

Summary of Material Financial Analyses

The following is a summary of the material financial analyses performed by Perella Weinberg and reviewed by the Medtronic board of directors in connection with Perella Weinberg’s opinion and does not purport to be a complete description of the financial analyses performed by Perella Weinberg. The order of analyses described below does not represent the relative importance or weight given to those analyses by Perella Weinberg. Some of the summaries of the financial analyses include information presented in tabular format.

In order to fully understand Perella Weinberg’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Perella Weinberg’s financial analyses.

Historical Share Price Analysis

Perella Weinberg reviewed the share price performance of Medtronic and Covidien during various periods ending on June 13, 2014 (the last trading day prior to the Medtronic board of directors meeting approving the

 

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execution of the Transaction Agreement). Perella Weinberg noted that the range of low and high trading prices of Medtronic common stock during the prior 52-week period was approximately $51 to $63, compared to the $60.70 closing market price per share of Medtronic common stock on June 13, 2014. Perella Weinberg noted that the range of low and high trading prices of Covidien ordinary shares during the prior 52-week period was approximately $57 to $74, which was lower than the $93.22 implied offer price for Covidien ordinary shares (based on the closing price of Medtronic common stock as of June 13, 2014).

The historical share price analysis provided general reference points with respect to the trading prices of Medtronic common stock and Covidien ordinary shares, which in turn enabled Perella Weinberg to compare the historical prices with the implied offer price in the transaction.

Equity Research Analyst Price Targets

Perella Weinberg reviewed and analyzed selected price targets for Medtronic common stock and Covidien ordinary shares published by equity research analysts during the period from April 25, 2014 through June 6, 2014.

The selected price targets reflect each analyst’s estimate of the future public market trading price of Medtronic common stock and Covidien ordinary shares at a date one year following the date of publication and are not discounted to reflect present values. Perella Weinberg noted that, as of June 13, 2014, the range of undiscounted equity analyst price targets for Medtronic’s common stock was between $57 and $70 per share, and the median of such targets was $66 per share and represented a premium to Medtronic’s stock price as of June 13, 2014 of 8.7%. Perella Weinberg also noted that, as of June 13, 2014, the range of undiscounted equity analyst price targets for Covidien’s ordinary shares was between $71 and $82 per share, and the median of such targets was $80 per share and represented a premium to Covidien’s share price as of June 13, 2014 of 11.1%.

The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for either Medtronic common stock or Covidien ordinary shares, and these estimates are subject to uncertainties, including the future financial performance of Medtronic and Covidien, respectively, and future financial market conditions.

Comparable Company Analysis

Perella Weinberg reviewed and compared certain financial information for Medtronic and Covidien to corresponding financial information, ratios and public market multiples for certain publicly held companies that operate in, or are exposed to, businesses similar to those of Medtronic and Covidien. Perella Weinberg performed a comparable company analysis in order to derive an implied range of values per share of Medtronic common stock and an implied range of values per ordinary share of Covidien from ratios and public market multiples for such companies. Although none of the following companies are identical to Medtronic or to Covidien, Perella Weinberg selected these companies because they had publicly traded equity securities and were deemed to be similar to Medtronic and Covidien in one or more respects including operating in the medical device, medical apparatus or medical technology manufacturing industry.

Selected Publicly Traded Companies

 

•

Abbott Laboratories

 

•

Baxter International Inc.

 

•

Becton, Dickinson and Company

 

•

Boston Scientific Corp.

 

•

C. R. Bard, Inc.

 

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•

Danaher Corporation

 

•

Johnson & Johnson

 

•

Smith & Nephew plc

 

•

St. Jude Medical, Inc.

 

•

Stryker Corp.

 

•

Thermo Fisher Scientific Inc.

 

•

Zimmer Holdings, Inc. (on a pro forma basis for its acquisition of Biomet)

For each of the selected companies, Perella Weinberg calculated and compared financial information and various financial market multiples and ratios based on company filings for historical information and certain publicly available financial projections for forecasted information. For Medtronic and Covidien, Perella Weinberg made calculations based on company filings for historical information and the Public Forecasts for forecasted information.

With respect to Medtronic, Covidien and each of the selected companies, Perella Weinberg reviewed enterprise value (calculated as fully diluted equity value (using the treasury method) plus debt, plus net non-operating liabilities, plus minority interest, less cash and cash equivalents), as a multiple of estimated earnings before interest, taxes, depreciation and amortization (“EBITDA”), and share price to estimated earnings per share (“EPS”), in each case presented based on fiscal years ending April 30. The per share values used for this analysis were based on the closing share prices of the companies on June 13, 2014 (other than Smith & Nephew plc, for which the per share value was based on its closing share price on May 27, 2014, the last trading day before media reports of potential transactions involving Smith & Nephew plc). The results of these analyses are summarized in the following table:

 

		EV /2015E EBITDA Multiple		Share Price /2015E EPS Multiple
Medtronic		9.4x		15.0x
Covidien		12.2x		16.9x
Abbott Laboratories		11.3x		17.3x
Baxter International Inc.		10.3x		13.9x
Becton, Dickinson and Company		10.6x		17.9x
Boston Scientific Corp.		12.0x		15.4x
C. R. Bard, Inc.		11.7x		16.0x
Danaher Corporation		12.4x		20.7x
Johnson & Johnson		11.3x		17.1x
Smith & Nephew plc		10.3x		18.4x
St. Jude Medical, Inc.		11.8x		15.9x
Stryker Corp.		11.4x		16.8x
Thermo Fisher Scientific Inc.		15.1x		16.5x
Zimmer Holdings, Inc.		9.8x		16.8x

Based on the analysis of the relevant metrics for each of the comparable companies and on the experience and judgment of Perella Weinberg, a representative range of financial multiples of the comparable companies was applied to the relevant financial statistics for Medtronic and Covidien to estimate an implied value per share of Medtronic common stock and Covidien ordinary shares. For the EV / 2015E EBITDA comparison, Perella Weinberg multiplied the relevant 2015E EBITDA multiple by the 2015E EBITDA to calculate enterprise value.

 

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To calculate the implied equity value, Perella Weinberg subtracted debt, non-operating liabilities and minority interest and added cash and cash equivalents. Perella Weinberg calculated implied value per share by dividing the implied equity value by the fully diluted shares (using the treasury method). For the Share Price / 2015E EPS comparison, Perella Weinberg multiplied the relevant 2015E EPS multiple by the 2015E EPS to calculate implied value per share.

Based on Medtronic’s and Covidien’s fully diluted equity values (using the treasury method), Perella Weinberg estimated the implied value per share of Medtronic common stock and the implied value per ordinary share of Covidien, in each case as of June 13, 2014, as follows:

 

		Comparable Company Multiple Representative Range				Implied Value Per Share
Medtronic
EV / 2015E EBITDA			9.0x – 11.0x			$	58 – $70
Share Price / 2015E EPS			13.0x – 17.0x			$	53 – $69
Covidien
EV / 2015E EBITDA			10.5x – 12.5x			$	61 – $74
Share Price / 2015E EPS			15.0x – 17.0x			$	64 – $73

Perella Weinberg compared the ranges of implied value per share of Medtronic common stock to the $60.70 closing market price per share of Medtronic common stock on June 13, 2014. Perella Weinberg also noted the ranges of implied value per ordinary share of Covidien were lower than the $93.22 implied offer price for Covidien ordinary shares (based on the closing price of Medtronic common stock as of June 13, 2014).

Although the selected companies were used for comparison purposes, no business of any selected company was either identical or directly comparable to either Medtronic’s or Covidien’s business. Accordingly, Perella Weinberg’s comparison of selected companies to Medtronic and Covidien and analysis of the results of such comparisons was not purely mathematical, but instead necessarily involved complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the relative values of the selected companies.

Precedent Transaction Analysis

Using publicly available information, Perella Weinberg reviewed the terms of selected precedent transactions involving companies that operated in, or were exposed to, the medical technology or other healthcare industry. Perella Weinberg selected these transactions in the exercise of its professional judgment and experience because Perella Weinberg deemed them to be most similar in size, scope and impact on the industry to Covidien or otherwise relevant to the transaction. No company or transaction was, however, identical to Covidien or the transaction.

For each transaction, Perella Weinberg calculated and compared the resulting enterprise value in the transaction as a multiple of EBITDA over the last twelve months publicly reported prior to the announcement of the transaction (referred to as LTM EV/EBITDA) and the ratio of the purchase price per share to the earnings per share of the target over the twelve months prior to the announcement of the transaction (referred to as LTM P/E). In addition, for each transaction, where available, Perella Weinberg calculated the premiums of the offer price in

 

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the transaction to the target company’s closing stock price 30 days prior to the announcement of the transaction (except where otherwise noted in the tables below).

Medical Technology

 

Acquirer

Target

Announcement Date

Transaction Value (billions of USD)

LTM P/E

LTM EV / EBITDA

30-day Premium

Zimmer Holdings, Inc.

Biomet Inc.

4/24/14

$

13.4

18.1x

12.2x

N/A(1)

Valeant Pharmaceuticals International Inc.

Allergan Inc.

4/22/14

$

53.8

35.5x

(2)

23.7x

(2)

39%(2)

Johnson & Johnson

Synthes Inc.

4/27/11

$

19.7

23.1x

12.2x

36%(3)

Hologic Inc.

Cytyc Corporation

5/20/07

$

6.1

35.5x

24.1x

32%

Boston Scientific Corp.

Guidant Corporation

12/05/05

$

25.4

40.8x

25.8x

25%(4)

 

(1)	Biomet is not a publicly traded company.

(2)

Reflects May 30, 2014 offer by Valeant, which was rejected by the Allergan board of directors. Premium based on closing share price on the last trading day prior to public reports of possible bid on April 10, 2014. Transaction value does not include a Contingent Value Right relating to future sales of certain target products.

(3)	Premium based on closing share price on the last trading day prior to public reports of possible bid on April 15, 2011.

(4)	Premium based on closing share price on the last trading day prior to public reports of possible bid on December 1, 2004.

Other Healthcare

 

Acquirer		Target		Announcement Date				Transaction Value (billions of USD)				LTM P/E				LTM EV/ EBITDA				30-day Premium
Actavis plc		Forest Laboratories Inc.			2/18/14			$	21.9				78.5x				52.5x				30	%
Thermo Fisher Scientific Inc.		Life Technologies Corporation			4/15/13			$	15.7				18.7x				12.6x				49	%(1)
Express Scripts Inc.		Medco Health Solutions Inc.			7/21/11			$	33.7				18.8x				11.1x				27	%
Sanofi-Aventis SA		Genzyme Corporation			10/04/10			$	20.8				64.6x				26.9x				37	%(2)
Merck KGaA		Millipore Corporation			2/28/10			$	7.1				26.8x				17.4x				55	%
Merck & Co.		Schering-Plough Corporation			3/9/09			$	45.6				13.5x				11.7x				21	%
Pfizer Inc.		Wyeth			1/26/09			$	65.2				14.2x				8.2x				39	%

 

(1)	Premium based on closing share price on the last trading day prior to public reports of possible bid on January 18, 2013.

(2)	Premium based on closing share price on the last trading day prior to public reports of possible bid on July 23, 2010. Transaction value includes a Contingent Value Right valued at $2.23 per share as of 04/01/11, the first day of trading.

 

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Perella Weinberg observed that the LTM P/E ratio and LTM EV/EBITDA multiple for the transaction were 24.7x and 16.9x, respectively. Perella Weinberg also observed that the implied premiums of the offer price in the transaction to Covidien’s 30-day volume-weighted average price and Covidien’s June 13, 2014 closing share price were 29% and 29%, respectively.

No company or transaction utilized as a comparison in the selected precedent transactions analysis is identical to Covidien, nor are any such precedent transactions identical to the transaction. In evaluating the transactions listed above, Perella Weinberg made judgments and assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Medtronic and Covidien, including, but not limited to, the impact of competition on the business of Medtronic, Covidien or the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of Medtronic, Covidien or the industry or in the financial markets in general, which could affect the public trading value of the companies and the aggregate value of the transactions to which they are being compared.

Precedent Premium Paid Analysis

Perella Weinberg reviewed the premiums paid in all acquisitions of publicly-traded companies, as provided by Dealogic, announced since January 1, 2010 with transaction values of $50 million or greater in which a greater than fifty percent stake was acquired in the target company. From this pool, the following three types of acquisitions were selected and grouped together: (a) acquisitions with mixed cash and stock consideration, (b) acquisitions with all stock consideration, and (c) “merger of equals” transactions. Perella Weinberg also reviewed the premiums paid in selected Healthcare transactions as a subgroup. Healthcare transactions were selected by identifying transactions where the target was categorized in the healthcare general industry group as defined by Dealogic.

For each of the transactions, based on publicly available information, Perella Weinberg calculated the premiums of the offer price in the transaction to the target company’s closing stock price 30 days prior to the announcement of the transaction, and analyzed the first quartile high, median and third quartile low premiums each of the groups described above as well as for all the transactions as a group. The results of these analyses are summarized in the table below.

 

		Number of deals				Public Transactions Premiums Paid (%)
						25th Percentile				Median				75th Percentile
All deals
All industries			2,041				52				31				16
Healthcare			227				58				38				23
Mixed cash and stock
All industries			238				45				31				19
Healthcare			27				42				31				20
All stock
All industries			354				47				23				5
Healthcare			14				43				30				15
Merger of equals
All industries			44				26				13				5
Healthcare			4				28				25				16

 

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Based on the precedent premium paid data, precedent transactions data, and experience and judgment of Perella Weinberg, and recognizing that no company or transaction is identical to Covidien or to the transaction, respectively, a representative range of premiums of 20% to 40% was selected and applied to the Covidien share price as of June 13, 2014. This analysis resulted in an implied value per ordinary share of Covidien ranging from approximately $86 to $101 per share.

Discounted Cash Flow Analysis

Covidien

Perella Weinberg conducted a discounted cash flow analysis for Covidien based on the Public Forecasts and the Adjusted Covidien Forecasts by:

 

•

calculating, in each case, the present value as of June 13, 2014 of the estimated standalone unlevered free cash flows (calculated as adjusted earnings before interest payments after taxes plus depreciation and amortization, minus capital expenditures, and adjusting for changes in net working capital and other cash flows) that Covidien could generate for the remainder of fiscal year 2014 through fiscal year 2024 using discount rates ranging from 8.0% to 9.0% based on estimates of the weighted average cost of capital of Covidien derived using the Capital Asset Pricing Model (“CAPM”); and

 

•

adding, in each case, terminal values calculated using perpetuity growth rates ranging from 2.0% to 3.0% and discounted using rates ranging from 8.0% to 9.0%.

The range of perpetuity growth rates was estimated by Perella Weinberg utilizing its professional judgment and experiences, taking into account the Adjusted Covidien Forecasts and Public Forecasts and market expectations regarding long-term real growth of gross domestic product and inflation. Perella Weinberg also cross-checked such estimates of perpetuity growth rates against the EBITDA multiples implied by such growth rates and a range of discount rates to be applied to Covidien’s future unlevered cash flow forecasts.

Perella Weinberg used a range of discount rates from 8% to 9% derived by application of the Capital Asset Pricing Model, which takes into account certain company-specific metrics, including Covidien’s target capital structure, the cost of long-term debt, forecasted tax rate and historical beta, as well as certain financial metrics for the United States financial markets generally.

From the range of implied enterprise values, Perella Weinberg derived ranges of implied equity values for Covidien in each case both with and without the addition of cost synergies (discounted at 8.0% to 9.0% and using perpetuity growth rates ranging from 2.0% to 3.0% based upon Anticipated Synergies). To calculate the implied equity value from the implied enterprise value, Perella Weinberg subtracted debt, non-operating liabilities and minority interest and added cash and cash equivalents. Perella Weinberg calculated implied value per share by dividing the implied equity value by the fully diluted shares (using the treasury method). These analyses resulted in the following reference ranges of implied equity values per ordinary share of Covidien:

 

		Range of Implied Present Value Per Share		Range of Implied Present Value Per Share (including synergies)
Public Forecasts		$72 – $99		$90 – $124
Adj. Covidien Forecasts		$80 – $110		$99 – $136

Medtronic

Perella Weinberg conducted a discounted cash flow analysis for Medtronic based on the Public Forecasts and the Medtronic Forecasts by:

 

•

calculating, in each case, the present value as of June 13, 2014 of the estimated standalone unlevered free cash flows (calculated as adjusted earnings before interest payments after taxes plus depreciation and

 

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amortization, minus capital expenditures, and adjusting for changes in net working capital and other cash flows) that Medtronic could generate for the remainder of fiscal year 2015 through fiscal year 2024 using discount rates ranging from 8.0% to 9.0% based on estimates of the weighted average cost of capital of Medtronic derived using CAPM, and

 

•

adding, in each case, terminal values calculated using perpetuity growth rates ranging from 2.0% to 3.0% and discounted using rates ranging from 8.0% to 9.0%.

The range of perpetuity growth rates was estimated by Perella Weinberg utilizing its professional judgment and experiences, taking into account the Medtronic Forecasts and Public Forecasts and market expectations regarding long-term real growth of gross domestic product and inflation. Perella Weinberg also cross-checked such estimates of perpetuity growth rates against the EBITDA multiples implied by such growth rates and a range of discount rates to be applied to Medtronic’s future unlevered cash flow forecasts.

Perella Weinberg used a range of discount rates from 8% to 9% derived by application of the Capital Asset Pricing Model, which takes into account certain company-specific metrics, including Medtronic’s target capital structure, the cost of long-term debt, forecasted tax rate and historical beta, as well as certain financial metrics for the United States financial markets generally.

From the range of implied enterprise values, Perella Weinberg derived ranges of implied equity values for Medtronic. To calculate the implied equity value from the implied enterprise value, Perella Weinberg subtracted debt, non-operating liabilities and minority interest and added cash and cash equivalents. Perella Weinberg calculated implied value per share by dividing the implied equity value by the fully diluted shares (using the treasury method). These analyses resulted in the following reference ranges of implied equity value per share of Medtronic common stock:

 

		Range of Implied Present Value Per Share
Public Forecasts		$	54 – $72
Medtronic Forecasts		$	62 – $82

Miscellaneous

The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth herein, without considering the analyses or the summary as a whole could create an incomplete view of the processes underlying Perella Weinberg’s opinion. In arriving at its fairness determination, Perella Weinberg considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis considered. Rather, Perella Weinberg made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of its analyses. No company or transaction used in the analyses described herein as a comparison is directly comparable to Medtronic, Covidien or the transaction.

Perella Weinberg prepared the analyses described herein for purposes of providing its opinion to the Medtronic board of directors as to the fairness, from a financial point of view, as of the date of such opinion, of the merger consideration of one New Medtronic share to be received for each share of Medtronic common stock (taking into account the acquisition of Covidien) as provided for in the Transaction Agreement to the holders of Medtronic common stock (other than Medtronic and its subsidiaries). These analyses do not purport to be appraisals or necessarily reflect the prices at which businesses or securities actually may be sold. Perella Weinberg’s analyses were based in part upon third party research analyst estimates, which are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by Perella Weinberg’s analyses. Because these analyses are inherently subject to uncertainty, being based upon numerous factors or events beyond the control of the parties to the Transaction Agreement or their respective advisors, none of Medtronic, Covidien, Perella Weinberg or any other person assumes responsibility if future results are materially different from those forecasted by third parties.

 

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As described above, the opinion of Perella Weinberg to the Medtronic board of directors was one of many factors taken into consideration by the Medtronic board of directors in making its determination to approve the transaction. Perella Weinberg was not asked to, and did not, recommend the specific consideration to the Medtronic shareholders provided for in the Transaction Agreement, which consideration was determined through arm’s length negotiations between Medtronic and Covidien.

Pursuant to the terms of the engagement letter between Perella Weinberg and Medtronic dated as of May 11, 2014, Medtronic became obligated to pay Perella Weinberg $7 million upon the delivery of Perella Weinberg’s opinion, and has agreed to pay Perella Weinberg an additional $29 million upon the closing of the transaction. In addition, Medtronic agreed to reimburse Perella Weinberg for its reasonable expenses, including attorneys’ fees and disbursements, and to indemnify Perella Weinberg and related persons against various liabilities, including certain liabilities under the federal securities laws.

In the ordinary course of its business activities, Perella Weinberg or its affiliates may at any time hold long or short positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers or clients, in debt or equity or other securities (or related derivative securities) or financial instruments (including bank loans or other obligations) of Medtronic or Covidien or any of their respective affiliates. During the two-year period prior to the date of Perella Weinberg’s opinion, no material relationship existed between Perella Weinberg and Medtronic or Covidien or their respective affiliates pursuant to which compensation was received by Perella Weinberg; however, Perella Weinberg and its affiliates may in the future provide investment banking and other financial services to Medtronic and Covidien and their respective affiliates and in the future may receive compensation for the rendering of such services.

Opinion of Covidien’s Financial Advisor

Goldman Sachs delivered its opinion to Covidien’s board of directors that, as of June 15, 2014 and based upon and subject to the factors and assumptions set forth therein, the scheme consideration to be paid pursuant to the Transaction Agreement was fair from a financial point of view to the holders (other than Medtronic and its affiliates) of Covidien ordinary shares. On October 20, 2014, Goldman Sachs confirmed to Covidien’s board of directors that had Goldman Sachs performed its financial analyses set forth in its presentation to the board of directors of Covidien on June 15, 2014 on the basis of the Contemplated Funding Structure, there would have been no change to the conclusion set forth in its opinion. The confirmation did not address any circumstances, developments or events occurring after June 15, 2014, the date of the opinion, other than the Contemplated Funding Structure.

The full text of the written opinion of Goldman Sachs, dated June 15, 2014, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with its opinion, is attached as Annex F. The full text of the confirmation letter of Goldman Sachs, dated October 20, 2014, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the letter, is attached as Annex G. Goldman Sachs provided its opinion and confirmation letter for the information and assistance of Covidien’s board of directors in connection with its consideration of the transactions contemplated by the Transaction Agreement. Neither the Goldman Sachs opinion nor the Goldman Sachs confirmation letter is a recommendation as to how any holder of Covidien ordinary shares should vote with respect to the transaction or any other matter.

In connection with rendering the opinion described above and performing its related financial analyses, Goldman Sachs reviewed, among other things:

 

•

the Transaction Agreement;

 

•

the announcement of the transaction pursuant to Rule 2.5 of the Takeover Rules;