What You Should Know:
– Medtronic today announced its strategic decision to separate its Diabetes business into a new, independent, publicly traded company (“New Diabetes Company”).
– The move aims to create a more focused Medtronic, with a simplified portfolio concentrated on high-margin growth markets, while simultaneously establishing a scaled, independent leader in the diabetes sector.
– The separation is expected to be completed within 18 months through a series of capital markets transactions, with a preferred path involving an initial public offering (IPO) followed by a subsequent split-off. This transaction is anticipated to unlock value for Medtronic and its shareholders.
A More Focused Medtronic, A Dedicated Diabetes Leader
This strategic shift will allow Medtronic to intensify its focus on innovation-driven growth and category leadership in other attractive MedTech markets.
“Active portfolio management is an important lever to delivering on our ongoing growth and success, and this decision shifts the Medtronic portfolio to have intense focus on our highest margin growth drivers where we have our strongest core competencies,” said Geoff Martha, chairman and CEO of Medtronic. Medtronic is building momentum with growth drivers such as pulsed field ablation, renal denervation, implantable tibial neuromodulation, and soft tissue robotics. Post-separation, Medtronic expects to drive durable, mid-single digit or higher organic revenue growth and accelerate earnings leverage.
At the same time, the New Diabetes Company will emerge as a leading, scaled, direct-to-consumer diabetes business, uniquely positioned as the only company to commercialize a complete ecosystem for intensive insulin management. This independence is expected to enable more focused investment in the New Diabetes Company’s pipeline, manufacturing scale, and automation, positioning it for success in Automated Insulin Delivery and Smart MDI, while driving margin expansion over time.
Que Dallara Appointed CEO
Que Dallara, current EVP and president of Medtronic Diabetes, will become CEO of the New Diabetes Company. The Diabetes business currently comprises over 8,000 employees worldwide, with a global commercial footprint and dedicated innovation, manufacturing, clinical, and quality systems.
Transaction Details and Timeline
The separation will create an independent, publicly traded company, with Medtronic’s preferred path being an IPO of the New Diabetes Company followed by a split-off transaction. This approach is expected to appropriately capitalize the New Diabetes Company and provide the ability to retire Medtronic shares. The separation is generally anticipated to be tax-free to Medtronic shareholders for U.S. federal income tax purposes. The New Diabetes Company will inherit the Diabetes business employees, product portfolio, pipeline, intellectual property, strategic partnerships, and global manufacturing facilities.
Medtronic is targeting completion of this 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 of Directors, receipt of a favorable tax opinion, and applicable regulatory approvals.
Financial Benefits of the Separation
The Diabetes business represented 8% of Medtronic’s revenue and 4% of its segment operating profit in fiscal year 2025. Upon completion, the separation is expected to improve Medtronic’s adjusted gross margin by approximately 50 basis points and its adjusted operating margins by approximately 100 basis points, while being immediately accretive to adjusted EPS. The transaction is also expected to provide the ability to retire Medtronic shares outstanding without reducing cash, resulting in EPS accretion and a reduction in dividend liability for Medtronic, enabling increased investment in growth-accretive areas. Medtronic anticipates its dividend per share will remain unchanged post-transaction, with no change to its dividend policy.
