The $42.9 billion merger between medical device makers Medtronic Inc. (NYSE: MDT) and Covidien PLC (NYSE: COV) was officially confirmed early Monday morning by the two companies. Medtronic will pay $93.22 in cash and stock for Covidien, a premium of around 29% to Covidien’s Friday closing price in New York.

The deal is a “tax inversion” in which the acquiring company — Medtronic — establishes a new company — this time in Ireland, home of Covidien — which buys both Medtronic and Covidien. As long as 20% of the new company’s shares are owned by non-U.S. shareholders who owned Covidien stock before the merger, the new company can be domiciled outside the United States and pay Ireland’s corporate tax rate of 12.5%, versus the 35% U.S. corporate tax rate.

Shareholders love these deals because the typical outcome is the new offshore company raises its dividend payment to reflect the lower tax rate it is now paying. A group of major investors in Walgreen Co. (NYSE: WAG) have argued for the company to use the occasion of its alliance with Alliance Boots to re-domicile the U.S. firm in Switzerland.

Unlike Walgreen, which has to worry about its public image in the United States, Medtronic can scuttle off to Ireland with the knowledge that the general public doesn’t know who the company is or what it does. Congress may make some new noise about eliminating the “tax inversion” loophole, but that won’t materialize until after the November elections, if at all.

Nothing that either company has to say about synergies or innovation or serving customers means anything. This deal is about avoiding U.S. taxes and paying higher dividends — the two things nearest to an investor’s heart.

In premarket trading on Monday, Covidien shares traded up about 36.5% to $98.25, above the 52-week range of $53.05 to $73.80.

Medtronic stock traded up about 12.5% to $68.30, above the current 52-week range of $51.06 to $64.33.

ALSO READ: Taxpayer Group Protests Walgreen Offshore Move

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