(Updates with VNUS first-quarter earnings details)

 
   DOW JONES NEWSWIRES 
 

Covidien Ltd. (COV) will acquire medical-device maker VNUS Medical Technologies Inc. (VNUS) for $440 million as it looks to expand its presence in the vascular market.

Unlike many of its rivals, who are being hurt by hospital-spending cutbacks, Covidien sells mostly less-expensive medical products and equipment that won't pressure budgets.

Covidien will pay $29 a share in the all-cash offer, a 36% premium over VNUS's Thursday closing price. Both companies' shares were inactive premarket.

The deal is expected to close by June 30; if so it would slighly cut into earnings for the year ending Sept. 30 excluding acquisition-related charges.

San-Jose, Calif.-based VNUS makes devices for minimally invasive treatment of venous reflux disease, a cause of varicose veins that can result in leg pain, swelling, fatigue and skin ulcers. Its products include the VNUS Closure system, which uses a radiofrequency catheter to heat and close diseased veins. In trials, the system has been shown to be as effective as vein stripping, a surgical procedure, with fewer side effects and faster recovery.

Meanwhile, VNUS also reported Friday it swung to a first-quarter profit of $1.9 million, or 11 cents a share, from a year-earlier loss of $420,000, or 3 cents a share. Revenue rose 31% to $24.7 million as gross margin rose to 70% from 66.1%.

The company had said in February it expected earnings between break-even and 1 cent a share and revenue of $22.9 million to $24.1 million.

VNUS Chief Executive Brian Farley said the results "substantially exceeded our expectations in every aspect of our business."

-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089; kerry.grace@dowjones.com