Given Imaging Ltd (NASDAQ:GIVN) inked a definitive agreement with Covidien plc (NYSE:COV), which will acquire all of its outstanding shares for approximately $860 million or $30 per share in cash. As a result, the stock price of Given Imaging climbed more than 27% a share on Monday to $30.06 a share.

According to Covidien plc (NYSE:COV), it will finance the transaction using its cash on hand. Given Imaging Ltd (NASDAQ:GIVN) will become part of its Medical Devices business unit and expects to generate additional $40 million to $50 million incremental revenue every quarter after the closing of the deal.

Given Imaging Ltd (NASDAQ:GIVN) is a pioneer in the field of capsule endoscopy. and it is now one of the leading providers of gastrointestinal (GI) medical devices such as PillCam, an innovative swallowed capsule endoscope.

Covidien plc (NYSE:COV) said the transaction will boost its ability to serve the multibilliondollar gastrointestinal market globally. It will also support its strategy to comprehensively address the key global specialties and procedures.

In a statement Bryan Hanson, group president of the Medical Devices & U.S. business of Covidien plc (NYSE:COV) said,  “We believe GI is one of the most attractive specialty procedure areas. Acquiring Given will enable Covidien to significantly expand its presence in a $3 billion GI market. Adding Given’s portfolio of diagnostics to our portfolio accelerates Covidien’s strategy of providing physicians with products that support the patient along the care continuum from diagnosis to treatment. It also confirms our leadership in developing less-invasive screening, diagnosis and treatment solutions that can improve patient outcomes and lower healthcare costs.”

On the other hand, Homi Shamir, president and CEO of Covidien plc (NYSE:COV) said, “Given Imaging revolutionized GI diagnostics over 12 years ago with the launch of PillCam and created an entirely new diagnostic category — capsule endoscopy. The combination of Covidien’s established global presence and Given Imaging’s innovative capabilities has the potential to transform this market.”

In addition, Shamir said, “After thoroughly evaluating our strategic options we determined that this transaction is in the best interests of Given Imaging, its shareholders and employees and provides unique benefits to patients globally.”

The board of directors of both companies approved the transaction, which is still subject to regulatory and shareholders’ approval. Elron and Rdc, which owns 44% stake in Given Imaging Ltd (NASDAQ:GIVN) voted in favor of the deal.