It is as if the deal cannot get sweeter than this. Volcano Corporation (NASDAQ:VOLC) accepted to be part of Dutch’s Royal Philips for a cash consideration of $1.2 billion. The deal looks good, and there may be none sweeter than it coming from within the U.S. because of the antitrust hurdles.
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57% premium
The acquisition deal between Volcano Corporation (NASDAQ:VOLC) and Philips means that shareholders of the U.S. medical devices maker will receive $18 per share. The offer is a premium of 57% over the closing price of the stock on the last day before the deal was made public, The New York Times stated in an article.
Debt assumption included
For Philips, the acquisition of Volcano means that it will boost its line of medical imaging devices. Additionally, the Dutch electronics giant expects to expand the sale of its medical imaging devices while selling to the current customers of Volcano. Philips will pay $1 billion for all the outstanding shares of Volcano, and the rest of the acquisition amount will meet Volcano’s debt, bringing the total acquisition value to $1.2 billion. The Dutch company intends to use its cash on hand and debt to pay for the acquisition.
The acquisition is expected to close in 1Q2015 if all goes according to plan. The board of directors of Volcano Corporation (NASDAQ:VOLC) has already unanimously approved the transaction. Shareholders have also been asked to approve the deal. Volcano will become part of the imaging therapy group within Philips.
Reprieve for distressed Volcano
As for Volcano Corporation (NASDAQ:VOLC), the deal comes as a reprieve for the company. Anyone who has been following the medical devices company for any amount of time understands its pressures. An activist shareholder known as Engaged Capital had been exerting pressure on the company to enhance shareholder value.
Financial outlook
Volcano Corporation (NASDAQ:VOLC)’s financial performance in the recent times has raised more questions than answers among its shareholders. The company posted revenue of $97.46 million in the most recent quarter, which compared with $102.61 million in the previous quarter. Volcano’s cash position also weakened in the latest quarter. It disclosed $31.96 million in the treasury yet it had $56.18 million in the previous quarter.
Technicals
Volcano Corporation (NASDAQ:VOLC) enjoyed a bull market from early 2008 to mid-2011, when it kept rising even when the global markets were seeing a meltdown. Now it has lost all the gains made in that period in the following bear market that may have bottomed out in November, as yesterday’s rally of 55% implies. Technically, the area around $19 will bring a lot of bears with a lot of supply, who are stuck there for a long time. Some consolidation at the higher levels now would be more preferable for the bulls.
