Volcano Corporation (NASDAQ:VOLC) Surges 55% On Buyout Deal

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Dallas, Texas 12/18/2014 (FINANCIALSTRENDS) – Volcano Corporation (NASDAQ:VOLC) surged more than 55% to match up an offer price of $18 per share. Koninklijke Philips NV (ADR) (NYSE:PHG) will acquire the company in a deal valued at $1.2 billion, including Volcano’s cash and debt. The transaction is expected to complete in the first quarter.

Following the news, more than 90.15M shares changed hands compared to its average volume of mere 674,482 shares. The offer price is approximately 27% below its 52-week high of $24.62.

The announcement marks Philips’ largest takeover since 2008, when it acquired Respironics Inc. for $4.62 billion. Peter Olofsen, an analyst at Kepler Cheuvreux, said the price tag implies 32 times of earnings and three times of enterprise value to sales ratio.

Value Proposition

Volcano Corporation (NASDAQ:VOLC) is a leader in catheter–based imaging and measurements and is the only company to enjoy leadership in both IVUS imaging and FFR measurements. The company reported total sales of $400 million in fiscal 2013, however, the company is struggling with margins since 2011. During the last fiscal, Volcano reported net loss of $34.5 million. The company had reported cash and cash equivalents of $31.95 million as on September 30, 2014.

Frans van Houten, CEO of Koninklijke Philips, said that the acquisition is expected to be accretive to the company’s EPS by 2017 as they are looking for a rapid turnaround in Volcano’s performance. Philips is expecting margin on EBITA of about 20% for its image-guided therapy business by 2017.

Management Quotes

Scott Huennekens, President and CEO of Volcano Corporation (NASDAQ:VOLC), said that the transaction will allow the company to become part of a leading image guided therapy business, benefitting Volcano’s customers, partners, shareholders and employees.

Upon completion of the transaction, Volcano’s 1,800 employees will become part of a new image-guided therapy group within Philips, which will be led by Bert van Meurs.

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