Covidien Buys Israeli Pulmonary Device Company

Covidien has agreed to buy Israel-based SuperDimension Ltd. for about $300 million initially plus possible future payments.

The privately held company develops minimally invasive interventional pulmonology devices. Its annual sales total about $30 million, Covidien said.

The deal, which is subject to customary closing conditions and regulatory approvals, is expected to close in the second quarter of this year. The purchase also follows a continuing industry trend toward more cost-effective procedures to tackle declining patient volumes, as fewer Americans opt for expensive treatments in light of a weakening economy.

SuperDimension’s iLogic system uses electromagnetic navigation bronchoscopy to provide access to lesions deep in the lungs. By extending the reach of conventional bronchoscopes, the system makes it easier for doctors to evaluate lung lesions, potentially allowing safer, more effective tissue biopsies.

”Covidien’s strategy is to invest in clinically and economically relevant products and technologies which can meaningfully improve patient outcomes while reducing the overall cost of care,” said Bryan Hanson, president of Covidien’s Surgical Solutions division. “The acquisition of SuperDimension will position Covidien to continue its investment in meaningful innovation by delivering more comprehensive solutions in the evaluation and treatment of lung diseases.”

Covidien officials don’t expect the acquisition to have a significant impact on its fiscal 2012 sales, but the deal is expected to slightly lower its fiscal 2012 earnings per share.

Given that Covidien paid 10 times the amount of SuperDimension’s annual, the company is betting that this will be a good long-term move.

Gabelli & Co. analyst Jeff Jonas told Reuters that several other industry giants including Medtronic Inc. were interested in buying SuperDimension. According to rumor, a bidding war culminated in Covidien eventually agreeing to pay $300 million.