Medtronic Inc. 's agreement on Sunday to buy rival medical-device maker Covidien PLC for $42.9 billion is the latest in a wave of recent moves designed—at least in part—to sidestep U.S. corporate taxes.

Covidien's U.S. headquarters are in Mansfield, Mass., where many of its executives are based. But officially it is domiciled in Ireland, which is known for having a relatively low tax rate: The main corporate rate in Ireland is 12.5%. In the U.S., home to Medtronic, the 35% tax rate is among the world's highest.

Such so-called "tax inversion" deals have become increasingly popular, especially among health-care companies, many of which have ample cash abroad that would be taxed should they bring it back to the U.S. Most notably, Pfizer Inc. recently mounted an aborted takeover bid for the U.K.'s AstraZeneca PLC, in what would have been a roughly $120 billion deal in part using its foreign cash and aimed at lowering the U.S. drug maker's corporate tax rate.

Medtronic and Covidien announced the deal on Sunday. Covidien stockholders will receive $93.22 per share, composed of $35.19 in cash and 0.956 of a Medtronic share. That represents a 29% premium to Covidien's closing share price Friday. Covidien shareholders will own 30% of the combined company.

The deal is subject to regulatory approval in a number of jurisdictions around the world. After completion, the combined company would have its main executive offices in Ireland. Its "operational headquarters" will be in Minneapolis, where Medtronic is currently based.