Medtronic to separate Diabetes business into new standalone company

Medtronic (MDT) announced its intent to separate its Diabetes business into a new standalone company. This strategic decision for both Medtronic and New Diabetes Company will create a more simplified portfolio in high margin growth markets. The separation is expected to be completed within 18 months through a series of capital markets transactions, with a preferred path of an initial public offering and subsequent split-off. The separation is expected to unlock value for Medtronic and its shareholders, as it creates a New Diabetes Company shareholder base more aligned with its financial profile and is expected to be accretive to Medtronic gross margin, operating margin, and earnings per share. The Diabetes business represented 8% of Medtronic revenue and 4% of Medtronic segment operating profit in fiscal year 2025. Upon completion, the separation is expected to improve Medtronic adjusted gross margin by approximately 50 basis points, adjusted operating margins by approximately 100 basis points, and be immediately accretive to adjusted EPS. The separation is expected to provide the ability to retire Medtronic shares outstanding without reducing cash, resulting in EPS accretion and a reduction in the dividend liability for Medtronic, enabling increased growth-accretive investment. Medtronic expects its dividend per share to remain unchanged pre- and post-transaction with no change to its dividend policy. The capital markets separation will create an independent, publicly traded company. The company’s preferred path for the separation is an IPO of New Diabetes Company, with a subsequent split-off transaction. This is expected to appropriately capitalize New Diabetes Company and provide the ability to retire shares in Medtronic. The separation is generally expected to be tax-free to Medtronic shareholders for U.S. federal income tax purposes. The separation will include the Diabetes business employees, product portfolio, pipeline, intellectual property, strategic partnerships, and global manufacturing facilities. Medtronic is targeting completion of the planned separation within 18 months, subject to customary conditions, including favorable market conditions, consultations with works councils and other employee representative bodies, final approval from the Medtronic board, receipt of a favorable opinion with respect to the tax-free nature of the transaction for U.S. federal income tax purposes, and receipt of applicable regulatory approvals.