Report: Covidien looks to expand

Covidien (NYSE: COV), which has snapped up more than a dozen small companies in the past three years, may scout for larger acquisitions as the industry consolidates, the Boston Globe reports.

The company has shied away from blockbuster deals since it was spun out of parent Tyco International in 2007, but it has sought to fill gaps in its product line through more modest buyouts. The largest was its $440 million purchase last year of VNUS Medical Technologies, which makes devices for minimally invasive treatment of venous reflux disease, the Globe notes.

Matthew Dodds, director of institutional research for Citigroup, says Covidien probably won't stray outside of its four areas of market focus. "It's really going to depend on what opportunities show up, and whether they make sense,'' Dodds explains. "What I don't see from Rich [Meelia] is the necessity to add another leg to their business. They have plenty to work with. There's no obvious larger candidates out there on the radar screen in some of their core business areas, like surgery, because they already have critical mass.''

Covidien had $1.7 billion in cash on its balance sheet at the end of March, and has told analysts it plans to spend about $750 million annually on acquisitions. It also wants to position itself in Asia, where it can tap into the continent's innovation and low-cost manufacturing.

Depsite Covidien's continued success, it is projecting that May will be challenging as the molybdenum-99 shortage continues; however, the outlook is significantly improved in June, reports. There has been a global shortage of medical isotopes following last year's shutdown of the National Research Universal Reactor in Canada.

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