Why Volcano Corporation's Shares Erupted Today

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What's happening?Shares of Volcano leapt 55% higher today following news that high-tech Dutch multinational Philips would acquirethe medical-device maker for $1.2 billion.

Why it's happeningPhilips will assume all of Volcano's debt and pay $18 per share in cash for the deal. Philips CEO Frans van Houten said in a statement that "acquir[ing] Volcano significantly advances our strategy to become the leading systems integrator in image-guided therapies," noting also that the buyout would mesh well with Philips' existing image-guided medical therapy offerings. Volcano is the market leader in tube-based ultrasound imaging of blood vessels, and also produces products for cardiovascular diagnostics and treatments.

The deal is expected to close early next year, at which time Volcano will become part of a new image-guided therapy segment to be led by current Philips executive Bert van Meurs. Volcano is presently unprofitable, and Philips has not provided combined financial estimates for its image-guided therapy segment yet. However, Philips hopes to expand this segment's operating margin to 20% by 2017.

The article Why Volcano Corporation's Shares Erupted Today originally appeared on Fool.com.

Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Volcano. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.