Medtronic plc (NYSE: MDT) announced on May 21, 2025, its intention to separate its Diabetes business into a new standalone company through a series of capital markets transactions. The healthcare technology giant plans to complete this strategic move within the next 18 months, with a preferred path of an initial public offering (IPO) followed by a split-off transaction.
The separation aims to create a more focused Medtronic with a simplified portfolio in high-margin growth markets, while establishing an independent, scaled leader in diabetes care. The Diabetes business currently represents 8% of Medtronic's revenue and 4% of its segment operating profit in fiscal year 2025.
"This marks a significant milestone in driving both Medtronic and the Diabetes business to achieve lasting value for Medtronic, our shareholders, customers, and patients," said Geoff Martha, chairman and CEO of Medtronic. "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."
Financial Impact and Strategic Benefits
The separation is expected to deliver substantial financial benefits to Medtronic, including an improvement in adjusted gross margin by approximately 50 basis points and adjusted operating margins by approximately 100 basis points. The transaction is also expected to be immediately accretive to Medtronic's adjusted earnings per share (EPS).
For Medtronic shareholders, the company expects the transaction to be generally tax-free for U.S. federal income tax purposes. The company's dividend per share is anticipated to remain unchanged following the separation, with no alterations to its dividend policy.
Post-separation, Medtronic will concentrate on its innovation-driven growth and category leadership for healthcare systems and physician customers. The company is building momentum with its growth drivers and advancing its innovation pipeline, including pulsed field ablation, renal denervation, implantable tibial neuromodulation, and soft tissue robotics.
The New Diabetes Company
The New Diabetes Company will emerge as a direct-to-consumer business uniquely positioned as the only company to commercialize a complete intensive insulin management ecosystem. With more than 8,000 employees worldwide, the business has a global commercial footprint and dedicated innovation, manufacturing, clinical, and quality systems.
Que Dallara, current Executive Vice President and president of Medtronic Diabetes, will assume the role of CEO of the New Diabetes Company. Under her leadership, the standalone entity will focus on accelerating innovation in Automated Insulin Delivery and Smart MDI (Multiple Daily Injections), while driving margin expansion over time.
"I'm incredibly grateful to Geoff for his vision and commitment to investing in the Diabetes business — we wouldn't be where we are without his unwavering support," said Dallara. "As we embark on this exciting new chapter, we celebrate the tireless efforts and dedication of our teams. Their passion and perseverance have brought us to this pivotal moment. Together, we're poised to transform lives, giving people the freedom to forget diabetes and live their best lives."
Transaction Details and Timeline
The separation will include the transfer of Diabetes business employees, product portfolio, pipeline, intellectual property, strategic partnerships, and global manufacturing facilities to the new entity. Medtronic is targeting completion 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, and receipt of applicable regulatory approvals.
Goldman Sachs & Co. LLC and BofA Securities, Inc. are serving as financial advisors to Medtronic in its review of strategic alternatives for the New Diabetes Company. Legal counsel is being provided by Cleary Gottlieb Steen & Hamilton LLP and Baker McKenzie, with Skadden, Arps, Slate, Meagher & Flom LLP acting as special tax counsel.
Industry Context and Market Implications
This strategic move by Medtronic follows a broader industry trend of large healthcare companies streamlining their operations by divesting non-core businesses. The separation allows both entities to align their resources, research and development efforts, and commercial strategies with their specific market opportunities and customer needs.
For the diabetes care market, the emergence of a focused, independent company with Medtronic's technology and scale could accelerate innovation in a field where technological advancements are rapidly changing patient care. The New Diabetes Company will compete in the growing market for diabetes management technologies, which has seen increasing demand for connected devices and automated insulin delivery systems.
Market analysts will be closely watching how this separation affects both Medtronic's core business performance and the new entity's ability to capture market share in the competitive diabetes care landscape. The transaction represents one of the most significant restructurings in Medtronic's recent history and highlights the company's commitment to portfolio optimization and shareholder value creation.
