Covidien is acquiring Given Imaging, maker of the 'PillCam' oral endoscope, for $860M

Given Imaging ($GIVN) makes "PillCam," a pill containing a tiny, disposable camera that patients swallow to give GI doctors an endoscopic view of their small bowel, esophagus and colon. Irish medical device giant Covidien ($COV) over the weekend announced a definitive agreement to acquire the Israeli company for $860 million, ending about a year of takeover talk.

Given Imaging's PillCam SB 3 capsule--Courtesy of Given

PillCam is designed to be less invasive and more "patient-friendly," compared to, say, colonoscopy. To Covidien, that's worth $30 per share in cash--a 26.8% premium over Given's Friday close.

In striking the deal with Covidien, Given is apparently following the advice of an activist investor. Discovery Group, which owns about 4% of Given, said in October that the company should explore a sale, complaining of a strategic failure to exploit PillCam's opportunities. Given explored selling itself in 2012, but ended that process in January of this year. The $30-per-share price tag is at the top end of the range Discovery specified in October. 

Since then, Given has reported quarterly revenue of $50 million--nearly 10% over its year-ago sales, coupled with net income up 8% to $6.5 million. The boost in sales came in part on the back of new PillCam approvals in the U.S. and Japan. 

For its part, Covidien says Given provides a new entree into a lucrative part of the human body.

"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 of Covidien's medical devices and U.S. divisions, in a statement. 

PillCam is Given's flagship product, but in 2012 the company acquired SmartPill, maker of an ingestible device that measures pressure, pH and temperature as it travels through the gastrointestinal tract. That device is used to measure GI motility--useful, for example, in diagnosing problems like constipation and irritable bowel syndrome.

- read the press release

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