Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: FTC, EC, Canada condition Medtronic’s $42.9B purchase of Covidien, (Dec 1, 2014)

By Greg Hammond, J.D.

In a coordinated effort, the FTC, EC, and Canada’s Competition Bureau have imposed conditions on their approval of Medtronic, Inc.’s $42.9 billion acquisition of Covidien plc. Medtronic has agreed to divest Covidien’s drug-coated balloon catheter business, settling the three agencies’ anticompetitive concerns (In the Matter of Medtronic Inc., File No. 141 0187).

Following the companies’ June 15, 2014, Transaction Agreement, the FTC, EC, and Competition Bureau determined that the proposed acquisition might substantially lessen competition. The FTC’s complaint alleges that future competition would be eliminated in the U.S. market for drug-coated balloon catheters, which are used to clear blocked arteries. In addition, the Commission asserted that the combined entity would likely delay or forego the launch of another drug-coated balloon catheter company; would reduce the substantial and additional price competition that would have resulted from an additional supplier; and would reduce research and development for drug-coated balloon catheters. The Competition Bureau released a Position Statement, finding that substantially similar anticompetitive effects would occur in Canada, and the EC noted that the proposed transaction would remove a credible future competitor of Medtronic and reduce innovation in this area. The three agencies therefore worked collaboratively to ensure an effective remedy across North America and Europe.

According to the FTC’s consent agreement, Medtronic has agreed to divest Covidien’s drug-coated balloon catheter business to The Spectranetics Corporation. Both the Commission and the Competition Bureau found that Spectranetics was committed to carrying on the drug-coated balloon catheter business and had the managerial, operational, and financial capability to effectively compete in Canada and the United States. The EC also conditioned its approval of the acquisition on Medtronic’s commitment to divest.

“This review is another example of how parties can work effectively to resolve the Bureau’s concerns,” stated the Competition Bureau’s Senior Deputy Commissioner of Competition, Mergers, Lisa Campbell. “I am satisfied that the sale of the drug-coated balloon catheter business to Spectranetics will ensure that competition is preserved in the sale of medical devices for the treatment of peripheral vascular diseases.”

Attorneys: George S. Cary (Cleary Gottlieb Steen & Hamilton LLP) for Medtronic, Inc. Nelson O. Fitts (Wachtell, Lipton, Rosen & Katz) for Covidien plc. James R. Weiss, FTC Bureau of Competition.

Companies: Medtronic, Inc.; Covidien plc; The Spectranetics Corp.

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