Mega-merger mania has struck the medtech sector with the news that the USA’s Medtronic is buying Ireland-based Covidien for $42.9 billion in cash and stock.

Once the transaction is completed, Medtronic says it will have “significantly advanced its position as the world’s premier medical technology and services company”. The combined group will have annual revenues of $27 billion, including $3.7 billion from the emerging markets, and have 87,000 employees in more than 150 countries.

With Covidien, Medtronic says it will be able to provide “a broader array of complementary therapies and solutions that can be packaged to drive more value and efficiency”. This will be aided by both groups’ “deep relationships with healthcare system stakeholders [which] will provide enormous ability to identify and create further value-based solutions.

One of the key attractions of Covidien is the favourable corporate tax rates in Ireland, set at 12.5%. Hoping to nip criticism back home in the bud, Medtronic notes “as a direct benefit of the company’s new financial structure, it will commit to $10 billion in technology investments over the next 10 years in areas such as early stage venture capital investments, acquisitions and R&D in the USA”.

Omar Ishrak, Medtronic chief executive, said that the medical technology industry “is critical to the US economy, and we will continue to invest and innovate and create well-paying jobs”. He added that the firm continue to have its operational headquarters in Minneapolis, where Medtronic currently employs more than 8,000 people.

The transaction is expected to be accretive to earnings in 2016 and is expected to result in at least $850 million of annual pre-tax cost synergies by the end of 2018.