Philips Electronics’ share price down, to acquire catheter maker Volcano in a $1.2-billion deal including debt

Philips Electronics made an official statement today that it reached an agreement over the acquisition of Volcano Corp. in a deal estimated to over $1 billion.

The step is considered as part of companys strategy to expand its reach in catheter-based imaging of both the heart and blood vessels in an attempt to focus on more prominent and profitable markets. The transaction is expected to be finalized during the first quarter of 2015.

The Chief Executive Officer of Philips, Frans van Houten, said in the statement, cited by Bloomberg: “We had been on the look-out for this company. In the summer there was heightened interest by competitors so we decided to engage.”

According to the companys statement, the total value of the deal amounts to $1.2 billion including debt. Philips revealed that the investors of Volcano will receive $18 per share in cash under the terms of the transaction.

The deal with Volcano comes almost three months after the Chief Executive Officer of Philips said the company is to be divided into two entities, separating the lighting division because he plans the rest of Philips to focus on health-care equipment and consumer goods.

As reported by the Wall Street Journal, CEO van Houten said in July this year: “The global health-care industry is undergoing a paradigm shift, providing significant opportunities for Philips to deliver more integrated solutions across the continuum of care, from prevention, diagnosis and treatment, to monitoring and aftercare.”

The Netherlands-based company has been recently trying to expand its reach in the image-therapy market, which is considered as more profitable. Volcano, on the other hand, manufactures catheters, which can be inserted into veins in order to make ultrasound scans on blood vessels.

Philips Electronics lost 2.49% to trade at €22.51 per share as of 11:25 GMT, marking a one-year decrease of 11.55%. The company is valued at €21.58 billion. According to the Financial Times, the 24 analysts offering 12-month price targets for Philips Electronics have a median target of €26.00, with a high estimate of €33.00 and a low estimate of €21.00. The median estimate represents a 12.63% increase from the last price of €23.09.