Over the weekend, Massachusetts medical device maker Covidien (NYSE:COV) announced a definitive agreement to acquire Israel’s Given Imaging (NSDQ:GIVN) in a deal valued at about $860 million.

Covidien plans to dole out $30 in cash for each GIVN share, a 27% premium over Given’s closing price on Friday, Dec. 6. News of the merger sent GIVN shares up 26% to $29.79 in early afternoon trading today.

Covidien hopes that Given Imaging, maker of the FDA-approved PillCam ingestible diagnostic camera, will provide the company a meaningful footprint in the gastrointestinal market.

"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," Covidien medical devices & U.S. group president Bryan Hanson said in prepared remarks. "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."

Given’s PillCam, the 3rd generation of which won FDA clearance in August, is a capsule-sized camera used to diagnose and monitor GI diseases. The device maker also has 7 other product lines that target 21 GI disease states, including the ManoScan high-resolution manometry system, the Bravo capsule-based pH monitoring device and the SmartPill motility monitoring platform.

"Given Imaging revolutionized GI diagnostics over 12 years ago with the launch of PillCam and created an entirely new diagnostic category – capsule endoscopy," Given president & CEO Homi Shamir said. "The combination of Covidien’s established global presence and Given Imaging’s innovative capabilities has the potential to transform this market."

COV shares were up 0.3%, trading at $68.23 as of about 12:15 p.m. today.