Covidien plc (NYSE: COV) today announced that it has closed its acquisition of Given Imaging Ltd., providing the company additional scale and scope to serve a significant medical specialty, the multibillion dollar global gastrointestinal (GI) market.
Under terms of the merger agreement, Covidien has acquired all outstanding Given shares for $30 per share or an aggregate consideration of approximately $860 million, net of cash and short-term investments acquired.
"Acquiring Given Imaging significantly expands Covidien's GI Solutions business and supports the company's strategy to comprehensively address key global specialties and procedures," said Bryan Hanson, group president, Medical Devices & U.S., Covidien. "We are committed to providing clinicians with more accurate and efficient diagnostic technologies to help achieve better outcomes for patients."
With this acquisition, Covidien now has one of the broadest portfolios for visualizing, monitoring and detecting abnormalities in the digestive system. A key technology in the Given portfolio is the worldwide market leading product PillCam®, a minimally-invasive, swallowed optical endoscopy technology for the small bowel, esophagus and colon that does not require sedation of the patient.
Covidien will report the Given Imaging business within the Advanced Surgical revenue reporting line. Given Imaging is expected to add between $40 and $50 million per quarter in incremental revenue.
On a reported U.S. GAAP basis, the transaction is expected to be dilutive to earnings per share (EPS) in fiscal 2014. On an adjusted basis, excluding one-time items and transaction costs, management expects the transaction to be neutral to EPS in fiscal 2014. The transaction is expected to be accretive to EPS both on a U.S. GAAP and on an adjusted basis in fiscal 2015 and beyond.
While the company has not completed its initial purchase price allocation and the final amount could differ significantly, it estimates incremental intangible asset amortization from the transaction to be approximately $35 to $45 million on an annual basis.
From a "cash earnings" standpoint, which excludes the impact of amortization, the transaction is expected to be accretive immediately.
Covidien management is not changing any of its guidance as a result of this transaction.