Medtronic's $4 billion exchange offer for its shares of MiniMed Group is a lot less attractive now that MiniMed's stock has dropped since the offer was unveiled a couple of weeks ago.

That could reduce participation and possibly prompt Medtronic to sweeten the deal. The tax-free exchange offer allows Medtronic investors to swap their shares for MiniMed shares held by Medtronic in what Wall Street calls a split-off.

Medtronic didn't immediately respond to a request for comment.

The big medical device maker owns 90% of MiniMed, which manufactures diabetes treatment products.

Medtronic took MiniMed public earlier this year; rather than spin off that remaining stake, Medtronic is offering its investors the exchange offer in what amounts to a stock buyback financed with MiniMed stock.

Medtronic is offering to swap some 225 million MiniMed shares-80% of its stake-for Medtronic stock with the option to swap its entire 90% stake, depending on demand.

The inducement: Medtronic holders would get MiniMed stock at a 7% discount to its market price. A discount in the 7%-to-10% range is common in split-off exchange offers such as Johnson & Johnson's exchange offer for Kenvue stock in 2023.

The problem for Medtronic is that MiniMed stock has dropped since the deal was announced on Sept. 14 and the discount is now just 3%, Barron's estimates.

MiniMed shares, which were trading Friday at $19.68, are down about 12% from $22.50 on Sept. 11, the trading day before the exchange offer was made. Medtronic stock, at $87.86, is off about 3%.

The drop in MiniMed could partly reflect selling by arbitragers.

Medtronic holders have until Oct. 9 to decide whether to participate, based on Barron's interpretation of the exchange offer document.

Medtronic is capping the number of MiniMed stock at 4.5939 shares for each Medtronic share. With the drop in MiniMed stock, investors stand to get the capped amount, which represents a roughly 3% discount-not the original 7%, Barron's estimates.

The final ratio is being calculated based on the price of the two stocks next week. A running total of the ratio and other information is available online.

With the discount now just 3%, it's possible that Medtronic could up the offer and extend the deadline.

One group of investors stands to benefit from the exchange offer. Holders of fewer than 100 shares of Medtronic who submit all their stock benefit from a so-called odd-lot provision that allows them to fully exchange all their stock.

Other Medtronic holders are subject to proration: They could get only a fraction of their shares exchanged if demand is high, which is often the case with exchange offers.

The odd-lot provision, which is common, has benefited small investors in other deals such as the 2024 offer by Cummins for its stake in Atmus Filtration Technologies. Atmus stock has doubled since then.

Medtronic and MiniMed have different investor bases.

Medtronic is a leading medical-device manufacturer that trades for about 15 times earnings and has a $110 billion market value, while MiniMed is much smaller at $5 billion and has stronger growth prospects from such products as insulin pumps for diabetics. It trades for about 30 times forward earnings.

The most comparable company to MiniMed is Dexcom, a much larger company in the diabetes market.