Covidien (COV) Acquires ev3, Inc. (EVVV) for $2.6 Billion

Shares of ev3, Inc. (EVVV) rallied more than 17% on Tuesday, the biggest advance in Russell 2000 Index, after medical device maker Covidien plc (COV) said it has agreed to acquire Plymouth, Minneapolis-based ev3. Inc., for $2.6 billion in cash in order to expand its business.

Under the agreement, Covidien plans to pay $22.50 for each ev3 share for a total of approximately $2.6 billion, a premium of nearly 19% over Friday’s closing price.

“Ev3 significantly expands our presence in the $3 billion peripheral vascular market and gives us a strong entry point into the $1 billion neurovascular market,” Covidien Chief Executive Officer Richard Meelia said in a statement. “As there is virtually no product overlap we foresee a very straight forward integration plan.”

For Covidien, this deal represents a big move since the co. could become a leading endovascular player, with strong positions in both the peripheral vascular and neurovascular markets.

Covidien announced that the company expects to incur a dilution of 5 to 8 cents in fiscal 2010, out of the current estimate of $3.40. For fiscal 2011, the dilution will be about 10 to 15 cents, vs the current average estimate of $3.76.

The deal is subject to customary closing conditions, including regulatory approvals, and is expected to be completed by July 31.

EVVV gained $3.31, or 17.49 percent, to $22.23 at 2:40 p.m. in Nasdaq composite trading. COV fell 37 cents, or 0.87 percent, to $42.02.

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