Healthcare technology company Medtronic has unveiled plans to separate its diabetes division into an independent entity, to be known as “New Diabetes Company.”
This move aims to streamline Medtronic’s operations, allowing it to concentrate on high-margin growth markets while establishing a new entity in the diabetes sector. New Diabetes Company will focus on advancing innovation in intensive insulin management by offering a comprehensive ecosystem.
The separation process is projected to be finalised within 18 months, primarily through an initial public offering (IPO) followed by a split-off transaction.
This approach is anticipated to enhance value for both Medtronic and its shareholders by aligning the new entity’s shareholder base with its financial objectives. The move is expected to positively impact Medtronic’s gross margin, operating margin, and earnings per share (EPS).
Currently, the diabetes segment contributes 8% of Medtronic’s revenue and 4% of its segment operating profit as of fiscal year 2025.
Post-separation, Medtronic expects its adjusted gross margin to increase by approximately 50 basis points and adjusted operating margins by around 100 basis points.
The transaction promises immediate accretion to adjusted EPS and will enable Medtronic to retire outstanding shares without affecting cash reserves. The company plans to maintain its current dividend per share policy throughout the process.
The establishment of New Diabetes Company as a standalone publicly traded firm will include all pertinent employees, product lines, pipeline initiatives, intellectual property, strategic alliances, and global manufacturing sites from the Diabetes division. The transaction is expected to be tax-free for US federal income tax purposes for Medtronic shareholders.
Completion of the separation is contingent upon customary conditions such as market conditions, consultations with employee representatives, and approval from Medtronic’s board of directors. It is also subject to favourable tax opinions for the transaction’s tax-free status in the US and necessary regulatory clearances.
Post-separation, Medtronic seeks to intensify its focus on innovation-driven growth within its core medical technology sectors. The company plans ongoing portfolio management and capital allocation adjustments to prioritise high-growth areas such as pulsed field ablation and renal denervation.
These strategies aim to sustain mid-single-digit organic revenue growth and enhance earnings leverage.
Medtronic chairman and CEO Geoff Martha said: “This marks a significant milestone in driving both Medtronic and the Diabetes business to achieve lasting value for Medtronic, our shareholders, customers, and patients.
“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.”
New Diabetes Company is poised to become a leading direct-to-consumer business in diabetes management, uniquely positioned with capabilities in automated insulin delivery and smart multiple daily injections (MDI).
With over 8,000 employees globally, the new entity will be led by Que Dallara, currently executive vice president and president of Medtronic diabetes.
