Covidien is acquiring Given Imaging, a gastrointestinal tract imaging firm for $860 million in cash.

The boards of both Dublin, Ireland-based Covidien and Yoqneam, Israel-based Given Imaging have approved the transaction by which the former will buy all outstanding shares of the latter for $30 in cash. The deal is expected to close by March 31.

JP Morgan Healthcare Analyst Michael Weinstein described the deal as "not headline grabbing by any means" but one that Covidien, which has an active M&A group, is familiar with.

According to Glenn Novarro, senior analyst with RBC Capital markets, Given Imaging is well known for the Given System including the PillCam for the small bowel, which contributed 65% to the company’s overall revenue in 2012. There are two other PillCam products - the PillCam Eso for the esophagus and the PIllCam Colon for the colon and rectum, Novarro explained in a note Monday. [PillCam Colon is not approved in the U.S. so far]

Overall, the Given System system comprises three things,

Following the deal, Covidien expects Given Imaging to add $40 million to $50 million in revenue per quarter to its medical devices business. The company has seven product lines that treat 21 GI disease states, according to Covidien.

“We believe GI is one of the most attractive specialty procedure areas. Acquiring Given will enable Covidien to significantly expand its presence in a $3 billion GI market,” said Bryan Hanson, Group President, Medical Devices & U.S., Covidien, in a news release. “Adding Given’s portfolio of diagnostics to our portfolio accelerates Covidien’s strategy of providing physicians with products that support the patient along the care continuum from diagnosis to treatment. It also confirms our leadership in developing less-invasive screening, diagnosis and treatment solutions that can improve patient outcomes and lower healthcare costs.”

Novarro believes that Given Imaging expands Covidien’s presence in the GI space in which it got its feet wet with the initial November 2011 acquisition of Barrx Medical, now known as Covidien GI Solutions. That’s because the Israeli company has a direct and indirect sales and marketing team in nine countries with around 200 field reps. Another reason Novarro thinks COvidien bought Given is belong the company's senior management believes that growth can come from exploring new disease areas involving the colon such as Crohn's Disease and Ulcerative Colitis.

"We view the deal positively and consistent with the company's strategy of acquiring (leverageable & market leading) technologies that have potential to enhance COV's competitive position in attractive/growing segments -- in this case the GI segment(specifically, the ~$3B GI diagnostic imaging mkt)," wrote Leerink Swann healthcare analyst Richard Newitter, in a research note Monday. 

[Photo Credit: iStockphoto.com user draco77]

 -- By Arundhati Parmar, Senior Editor, MD+DI
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