Philips To Acquire Volcano Corporation For $1.2 Billion

By Jof Enriquez,
Follow me on Twitter @jofenriq

Royal Philips NV recently announced that it has agreed to purchase catheter-based imaging company Volcano Corporation for $1.2 billion in cash, or $18 per share. The transaction is expected to be completed by the end of the first quarter of 2015 after regulatory and customary closing conditions are met.

According to a statement from Philips, Volcano is the only company in the industry with a leading position in both intravascular ultrasound (IVUS) imaging and fractional flow reserve (FFR) measurements. Philips added that acquiring Volcano will help it make inroads into the high-growth, €4 billion image-guided therapy market.

“The agreement to acquire Volcano significantly advances our strategy to become the leading systems integrator in image-guided therapies,” Frans van Houten, CEO, Royal Philips, said in the statement. “Volcano’s impressive and unique product portfolio is highly complementary to our strong offering in live image-guidance solutions, creating an opportunity to accelerate the revenue growth for our image-guided therapy business to a high single-digit rate by 2017.”

After the close of the transaction, Volcano and its 1,800 employees will be part of a dedicated, new image-guided therapy business group within Philips. That unit will be led by Philips executive Bert van Meurs, according to the statement.

“There is a large and growing global market opportunity for image-guided therapies, and as part of Philips, we gain the scale and resources needed to accelerate our goals of improving patient outcomes on a global basis, lowering cost and delivering innovative diagnostics and therapies in the coronary and peripheral markets,” Scott Huennekens, president and CEO, Volcano Corp., added in the statement.

Analysts view the deal as expensive, but they believe it makes strategic sense for Philips, according to the Wall Street Journal. Volcano posted sales figures of about $400 million in 2013, but the company is currently operating at a loss. Regardless, Philips expects to grow margins in the newly formed business group to 20 percent by 2017.

As part of a major restructuring plan, Philips is merging its existing healthcare business with its consumer electronics business to form a new company called HealthTech. It plans to spin off its Lighting business through a possible initial public offering in 2016.