Medtronic begins final steps to separate MiniMed

Dive Brief:

Medtronic said Monday that it has started an exchange offer to split off up to 80.1% of the shares of MiniMed.
Formerly Medtronic’s diabetes technology business, MiniMed went public in March as part of a two-step separation process. Exchanging the remainder of Medtronic’s shares is the second part of the process. Medtronic currently owns 89.9% of the company.
Medtronic CEO Geoff Martha said the offer “reflects our confidence in MiniMed as an independent company, giving the diabetes company more focus and flexibility, and allowing Medtronic to focus capital on its cardiovascular, neuroscience and surgical portfolios.”

Dive Insight:

Monday’s filing is a procedural milestone, RBC Capital Markets analyst Kendall Au wrote in a research note. The offer would allow people to exchange shares of Medtronic for shares of MiniMed at a 7% discount.

The agreement includes a provision where Medtronic can sell all of its remaining interest in MiniMed if the exchange offer is oversubscribed, leaving it with no stake in the company. The exchange offer is set to expire on Oct. 9.

Since spinning out as an independent company, MiniMed has made strides toward new diabetes products. The company recently said it filed a Food and Drug Administration submission for its first patch pump, and has completed enrollment in a trial of an algorithm that would calculate a person’s insulin needs without meal announcements.

MiniMed shares have increased by about 18% since going public in March, to $21.50 Monday.

“It does not change who we serve, but it gives us complete autonomy over our capital allocation, our product roadmap, and our speed,” MiniMed CEO Que Dallara said in a statement about the separation.

RBC’s Au sees the separation as better aligned with Medtronic’s priorities. Medtronic will be losing a business with double the research and development intensity as the rest of the company, Au wrote, freeing up funds for cardiac ablation, renal denervation, Medtronic’s Altaviva neuromodulation system and its Hugo surgical robots.