(Corrects throughout to show that the name of the Stifel Nicolaus analyst is Thomas Kouchoukos, not McGrath Kathleen)
* Covidien to buy VNUS for $29/shr
* Offer is at premium of 36 pct to VNUS' Thursday close
* VNUS Q1 EPS, revenue beat Street
* VNUS shares touch lifetime high (Adds analysts' comments, updates share movement)
By Anand Basu
BANGALORE, May 8 (Reuters) - Medical products maker Covidien Ltd COV.N said it would buy VNUS Medical Technologies Inc VNUS.O for about $440 million, or $29 a share, in cash to expand its presence in the vascular market, sending VNUS shares to a lifetime high.
The deal represents a premium of 36 percent to VNUS' closing price on Thursday.
"I think at $29 it makes fair assumptions for both the buyer and the seller. VNUS is going to continue to grow over the next three or five years at over 20 percent," said Roth Capital Partners' analyst Matt Dolan.
Dolan, who has a "buy" rating on the shares of VNUS, said it has the lions share of vascular market and would give Covidien control from an intellectual property standpoint.
Stifel Nicolaus analyst Thomas Kouchoukos said it is a win-win situation for both companies.
Covidien provides VNUS a very nice distribution system to expand into the international markets, while for Covidien it is a logical move to focus on their vascular business, which is more focussed on vein treatment than arterial treatment, Kouchoukos said.
VNUS, a medical device maker, sells the Closure system that is a minimally invasive treatment of venous reflux -- an underlying cause of varicose veins that can result in symptoms including leg pain, swelling, fatigue and skin ulcers.
The deal, which is expected to close in the second calendar quarter, will hurt Covidien's 2009 earnings mainly due to a one-time charge related to in-process research and development, the companies said in a statement. Excluding the charge, the deal would be only slightly dilutive. However, Covidien does not expect the transaction to have a material impact on its fiscal 2009 sales or operating margin outlook.
Separately, VNUS reported a better-than-expected quarterly profit, helped by a 31 percent jump in revenue.
For the quarter net income was $1.9 million, or 11 cents a share, compared with a net loss of $420,000, or 3 cents a share, in the year-ago period. [ID:nWNAB6380]
"First-quarter results were again better-than-expected, they have been beating expectations consistently for the last two quarters and they are showing more operating leverage than we have anticipated," Roth Capital's Dolan said.
VNUS shares were up 35 percent at $28.73 in afternoon trade on Nasdaq. They earlier touched a high of $28.76. Shares of Covidien were trading flat at $34.35 Friday on the New York Stock Excahnge.
For deal-related alerts, please double click [ID:nWNAB6340] (Additional reporting by Esha Dey in Bangalore; Editing by Himani Sarkar, Jarshad Kakkrakandy)