The Deal: Israel's Given Imaging Surges on $860 Million Covidien Buyout

NEW YORK ( The Deal ) -- Given Imaging  (GIVN) was surging Monday after Irish medical devices company Covidien ( COV)  agreed to buy the Israeli medical diagnostics company  for $860 million. The deal comes two months after an activist investor asked the target to find a buyer.

Given shares were jumping 25% to $29.61 while Covidien was adding 0.5% to $68.38.

Covidien, of Dublin, said it would pay $30 per share for Given, a 27% premium to the stock's Friday close on Nasdaq, in a deal that is supported by Given's board as well as investors holding 44% of Given's shares.

"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," said Bryan Hanson, who is president of Covidien's medical devices and U.S. operations, in a statement. 

Given's remote imaging system allows doctors to diagnose gastrointestinal diseases in patients who have swallowed its Pillcam -- a wireless camera that wends its way through the digestive tract sending back video. Last year, the company hired Barclays to explore potential deals but called off the hunt after just a few months, saying it would be better off on its own.

Then, in October, Chicago activist investor Discovery Group Holding Company LLC blasted the target's management and told it to look for a new owner. The hedge fund, which holds about 4% of Given, said the Yoqneam, Israel-based company was worth $26 to $30 per share.

Given's shares gained 3.1%, or 3.10 shekels, to NIS102.40 ($29.24) in Tel Aviv Monday.

Last month, news of a potential deal at around $800 million appeared in Israeli financial press but reports suggested the buyer was Fujifilm Holdings, Olympus or Boston Scientific ( BSX). Strong interest in the company may have led Covidien to offer a higher premium, analysts said.

"After thoroughly evaluating our strategic options, we determined that this transaction is in the best interests of Given Imaging, its shareholders and employees and provides unique benefits to patients globally," said Given CEO and President Homi Shamir in a statement.
The Given investors backing the sale are three units of IDB Holding Corp. Ltd., the holding company of Israeli tycoon Nochi Dankner. The units, Elron Electronic Industries Ltd. and Discount Investment Corp. Ltd. as well as the Rafael Development Corporation Ltd. venture, own stakes worth a total $426 million at the offer price, IDB said Saturday.

IDB Holding Corp. Ltd. is currently restructuring its debt.

Covidien regularly makes large acquisitions to enter new markets and this summer spun off its pharmaceutical business, Mallinckrodt LLC, to focus on medical devices. Two years ago it paid $2.6 billion to acquire ev3, to move into vascular procedures. Ev3 makes devices for endovascular surgeries.

Last year, it spent a total $1.2 billion strengthening its medical devices unit. The acquisitions included $300 million for superDimension Ltd., Newport Medical Instruments Inc. for $108 million and the $346 million buy of Oridion Systems Ltd.

The company said Given would have little effect on its 2014 earnings but be accretive starting in 2015. It should add up to $50 million in revenue per quarter, according to Covidien.

The deal is expected to close in March and will be financed from existing cash.

Covidien turned to Meitar for legal advice including Dan Shamgar and Mike Rimon. The company's in-house corporate counsel is Matt Nicolella.

A Barclays team including Doug Solomon, Jed Brody and Soraya Scroggins provided financial advice to Given, while legal counsel was provided by Kirkland & Ellis LLP's David Fox, Daniel Wolf, Yi Claire Sheng, Scott Price, Mark Kovner and Daniel Tavakoli.

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