Medtronic will run Covidien as separate division

Health care supply company Covidien PLC will remain mostly intact as a separate division of Medtronic Inc. after the proposed $43 billion deal to merge the two companies under a new Irish parent.

With the deal potentially one month away, Fridley-based Medtronic revealed Friday morning how it plans to restructure its corporate divisions to accommodate the massive, Dublin-based Covidien's business units. It also described how it would restructure its operations around four international bases.

Meanwhile, Covidien also said Friday that it was laying off 160 people, though a company spokesman said the job cuts were not related to the transaction.

The two companies are in the midst of one of largest pending corporate mergers in the country. The deal has sparked resistance from shareholders and Washington Democrats because the combined company would be based in Ireland for tax purposes — a type of deal known as a corporate inversion.

Medtronic recently announced it would push ahead with the deal despite changes in U.S. tax rules designed to make inversions less attractive.

Medtronic officials have told U.S. antitrust regulators that the deal would not close before Nov. 15, though it might be delayed until the first quarter of 2015. The deal still needs approval from a majority of shareholders of both companies.

"In the coming months, the new executive team will work together to assist the integration planning efforts, listening and learning from both companies, to build our combined strengths and craft our future plans as one company," said Medtronic Chairman and CEO Omar Ishrak, who would retain those titles after the deal.

Bryan Hanson, who today is group president of Covidien, would become executive vice president and president of Medtronic's new Covidien group. Meanwhile, Mike Coyle would become executive vice president and president of the cardiac and vascular group, Hooman Hakami would become executive vice president and president of the diabetes group, and Chris O'Connell would become executive vice president of the restorative therapies group.

Covidien's existing peripheral vascular business and its neurovascular unit would be integrated into the divisions headed by Coyle and O'Connell, respectively.

Medtronic's C-suite would remain unchanged after the deal: Gary Ellis will continue as chief financial officer; Dr. Rick Kuntz will stay on as chief scientific, clinical and regulatory officer; and Brad Lerman would remain general counsel and corporate secretary.

Filings with the Securities and Exchange Commission say many of Covidien's top executives would receive sizable payouts if they are terminated from the company as part of the deal. Current Covidien Chairman, President and CEO Jose Almeida would receive about $66 million in cash and stock, though the exact amount could vary depending on Covidien's stock price when the merger takes place, according to the SEC filings.

Although Medtronic's executive headquarters would remain in Fridley after the deal, the company announced that it will manage international operations through four divisions: An Asia-Pacific region office in Singapore, an Americas unit based in Fridley, a Europe-Middle East-Africa division in Switzerland, and an entire division devoted to China in that country.

Covidien spokesman Peter Lucht confirmed Friday that the company has informed 160 employees in Mansfield, Mass., and Prague that their employment is being terminated, but he said the changes are not related to the Medtronic deal.

Last year, Covidien announced plans to cut between $250 million and $300 million in ongoing expenses. The job cuts are in the company's "shared services" back-office functions, like customer service, rebates, accounts payable and contracting.

"Covidien is committed to treating employees with dignity and respect. We understand changes like this are difficult," Lucht said, adding that the workers were eligible for severance packages.

Joe Carlson • 612-673-4779

Twitter: @_JoeCarlson