Japan's Fuji in talks to buy Given Imaging for $750m

A deal at this valuation would reflect a 78% premium for the company.

Given Imaging Ltd's (Nasdaq: GIVN; TASE: GIVN) talks for a sale are apparently most advanced with Japan's Fujinon, a unit of Fujifilm Holdings Corporation (TSE:4901). Market sources say that a deal is under discussion at a company value of $750 million for Given Imaging, a 34% premium on its $561 million market cap.

Given Imaging's share price rose a further 5.8% by mid-afternoon on the TASE today to NIS 73.85, continuing its rise since announcing last Thursday that it was in talks for a merger or sale of the company.

Elron Electronic Industries Ltd. (TASE: ELRN), a subsidiary of Nochi Dankner's IDB Holding Corp. Ltd. (TASE:IDBH) unit Discount Investment Corporation (TASE: DISI), owns 22% of Given Imaging, and Discount Investment owns 15.26%. Given Imaging has received several queries about an acquisition.

A source close to the deal told "Globes" today, "There is no chance Dankner will agree to sell the company value of less than $1 billion." A deal at this valuation would reflect a 78% premium for Given Imaging, which last reached such a market cap in 2004.

Dankner's need for cash is why he has put Given Imaging up for sale, even though he used to talk about its huge potential and expectations of $1 billion in annual sales, compared with its expected sales of $185-190 million in 2012. A year ago, Given Imaging president and CEO Homi Shamir told "Globes", "Nochi strongly believes in Given Imaging's great future, and he has patience."

Given Imaging develops, manufactures, and sells endoscopic capsules, the PillCam, for diagnosis of the small and large intestine. The company has longstanding ties with Fujifilm and its subsidiaries, going back to 2007 when it signed a strategic R&D and marketing cooperation agreement with Fujinon.

Fujifilm has distributed Given Imaging's PillCam Small Bowel capsule in Japan since 2009. Although, a few months ago, Given Imaging decided to market its products directly in Japan, the ties with Fujifilm remain intact, after Given Imaging terminated its distribution agreement with its other Japanese distributor, Suzuken Co. Ltd. (TSE: 9987).

Given Imaging is an attractive acquisition

Oppenheimer & Co. said today, "We believe that the company is an attractive acquisition target by a buyer from among leading medical equipment companies, alongside IDB's need to sell assets." The analysts raised their target price for Given Imaging from $18 to $27, reflecting a value of $830 million. They believe that the company's p/e ratio of 3 (below the average for small companies in the industry), plus its $100 million in cash, give a company value of $700 million.

Calculations based on Given Imaging's operating profit result in a similar valuation. However, neither the p/e ratio and operating profit method take into account the potential of the company's PillCam Colon 2 capsule for diagnosing diseases of colon, as it has not yet been approved for marketing. Oppenheimer estimates the value of this product at hundreds of millions of dollars, which is the basis for its new target price.

Given Imaging chairman Israel Makov, previously served as CEO of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA). He has frequently spoken out against the sale of Israeli companies as they move from the R&D to the sales stage. "I am constantly disappointed to hear about an exit, when I think things could have been differently," he once told "Globes" in an interview.

On another occasion, Makov said, "Given Imaging is a jewel in the crown of Israel's medical devices industry, and has the potential of becoming a jewel in the crown of Israeli industry in general." He, together with two independent directors, is overseeing the company's sale.

Published by Globes [online], Israel business news - www.globes-online.com - on October 21, 2012

© Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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