Covidien PLC (COV): Interesting Medical Spin-Off for Mid-2013

Page 1 of 2

Dublin-based medical conglomerate Covidien PLC (NYSE:COV) has confirmed that it plans to complete the spin-off of its pharmaceutical division by the middle of 2013. Although the proposal to create Mallinckrodt Pharmaceuticals was announced more than a year ago, it has been subject to some non-fatal delays along the way. However, these appear to have been resolved. The soon-to-be-independent division has embarked on a major hiring spree and appears poised to begin trading on its own by the end of the second quarter of 2013. Current Covidien shareholders stand to reap the benefits of their patience in the form of an attractive share offering. At this point, it appears unlikely that anything will arise to scuttle or further delay the deal.

About Covidien PLC and Mallinckrodt Pharmaceuticals

Covidien is a highly-diversified drug and medical device manufacturer that makes a wide range of high-end medical products. Originally a wholly-owned division of Swiss conglomerate Tyco International Ltd. (NYSE:TYC) , Covidien PLC (NYSE:COV) has been independent for a number of years and has lately mounted an impressive program of organic growth. Tyco today focuses on safety and security solutions in various industries such as energy and shipping.  Covidien, on the other hand, produces a variety of surgical aids and devices, including laproscopic probes, vessel-sealing devices, staples, vascular dilation and contraction aids, and an assortment of dialysis-related products. It also manufactures ventilators, blood-flow aids, vital-signs monitors, and other types of durable hospital equipment. In addition to surgical aids and hospital-room machinery, the company also makes a variety of specialized disposable products for patients who suffer from incontinence, chronic wounds and other ongoing conditions. The company earned about $1.9 billion in revenue of $12 billion in 2012.  This number is now larger than Tyco, its parent company which has revenue just over $10 billion and a loss for the last twelve months.

Based in the Saint Louis area, Mallinckrodt Pharmaceuticals is Covidien’s pharmaceutical division and will soon become a standalone company. The firm is noted for producing various chemotherapy and radiotherapy drugs for cancer patients. It also produces opiate and NSAID painkillers, imaging and contrasting compounds, and diagnostic drugs that play an important role in detecting early signs of cancer and other serious health problems. The company operates a major research and development center in Missouri and employs several thousand others in various parts of the United States and Ireland.

How the deal is structured

Although the terms of this deal have yet to be finalized, its basic outline is clear. Covidien PLC (NYSE:COV) plans to spin off Mallinckrodt through a tax-free share distribution to all of its shareholders of record. The exact ratio by which the new company’s shares will be distributed has not yet been announced. It is expected that any fractional shares left over after the distribution will be distributed as cash payments to the appropriate shareholders. Thus far, there has been no talk of a special dividend, preferred stock distribution or other “sweeteners.”

Although it is not yet possible to pinpoint the exact premium that Covidien’s shareholders will receive as a result of the spin-off, the company’s investors have reacted favorably to news of the deal. Since its late 2011 announcement, Covidien’s shares have risen by more than 50%.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!