Volcano ($VOLC) has approved a $200 million stock repurchase plan, a sign the company is listening to an activist investor that wants it to boost its share value and find itself a buyer.
Under the board-approved effort, Volcano will put $100 million into an accelerated repurchase program aimed at retiring about 3.5 million shares and earmark the remainder for some open-market buybacks. The effort "underscores our confidence in Volcano's prospects and long-term outlook," CEO Scott Huennekens said in a statement, and the buyback falls in right in line with the advice of investor Engaged Capital, which has pressured Volcano to put its excess cash into a value-increasing plan.
Engaged, which owns about 5.1% of Volcano, believes the company would be an ideal takeover target for some of the industry's largest players, but not before it boosts share value. In a plan revealed last month, Engaged General Partner Glenn Welling advocated for a $200 million repurchase plan and some amendments to Volcano's executive compensation rules, moves that would prepare the company for an eventual takeover, which "is likely and would represent the optimal outcome for shareholders," Welling wrote.
Volcano has endured downgrade after downgrade this year, missing Wall Street profit estimates in four of the last 5 quarters and forecasting a below-expectations $395 million in revenue for 2013. That said, analysts see a lot of promise in the company's intravascular imaging technologies, which can help determine which patients need stents and thus stave off unnecessary procedures. As Jeffries' Raj Denhoy told Bloomberg, in the hands of a company like Abbott Laboratories ($ABT) or Medtronic ($MDT), Volcano's devices could be marketed as cost-cutting products for cash-strapped hospitals.
"If you look at where healthcare is headed, in the United States and really around the world in terms of trying to improve outcomes and reducing the cost of therapy, this is right in that sweet spot," Denhoy said.
- read the announcement