Covidien, an Ireland-based medical supplier, reported a 28% increase in net income for the first quarter of its fiscal 2015 as the company prepares to close a billion-dollar deal to be acquired by medical-device manufacturer Medtronic.
Sales rose 2% to $2.69 billion in the first quarter of the year, compared to $2.64 billion in the same quarter a year ago. That growth was driven by the company's surgical solutions business, which reported a 4% increase in sales to $1.31 billion in the first three months of its fiscal year. That business makes up almost half of Covidien's revenue. Its U.S. market activity also drove sales performance, with U.S. sales growing by 6% to $1.39 billion in the quarter.
Covidien's other business segments did not fare as well. Sales of vascular therapies rose only 1% to $428 million, while revenue for the respiratory and patient-care segment dropped by 1% to $945 million.
Medtronic's plan to buy Covidien for $42.9 billion is expected to close this year. The companies announced the deal in June, 2014, raising questions about tax-inversion deals that allow U.S.-based companies to access lower corporate tax rates in other countries. Covidien is based in Dublin, while Medtronic's headquarters are in Minneapolis.
The deal was the second of three multibillion-dollar acquisitions announced by medical-device makers in 2014. Along with the potential for tax-inversion benefits, another incentive for large manufacturers to pursue mega-mergers in 2014 was to find new ways to offset the pricing pressures that increasingly sophisticated and powerful U.S. health systems are putting on medical devices and supplies.
The acquisition is expected as soon as January 26. Shareholders at both companies this month approved the deal and it also has received clearance from the Federal Trade Commission.
Medtronic is expected to release its earnings Feb. 17.
Follow Jaimy Lee on Twitter: @MHjlee