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Analysts: Volcano could be an M&A fit for Abbott, Medtronic

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San Diego's Volcano ($VOLC) is facing shareholder pressure to boost its value and find itself a buyer, and analysts believe the intravascular device company could be an ideal target for med tech giants Abbott Laboratories ($ABT) and Medtronic ($MDT).

As Bloomberg reports, Volcano has missed Wall Street profit estimates in four of the last 5 quarters, but the company's fleet of vascular diagnostic devices still has great potential in the eyes of big-cap companies, analysts said. Volcano's devices are used to measure arterial blockages and help place stents, and while a nationwide decline in percutaneous intervention procedures has put a drag on sales, Jefferies' Raj Denhoy told Bloomberg that, in the right hands, the technology could be billed as means to prevent unnecessary stenting, a current bête noire in healthcare.

"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.

However, shareholders are unlikely to agree to a buyout anywhere near Volcano's current $1.1 billion market cap, and one activist group has outlined a plan to get the company's stock up to a more lucrative level. Engaged Capital, owner of a 5.1% stake in Volcano, is urging the company to launch a $200 million stock buyback and tweak its executive compensation rules, a plan Engaged said will boost investor confidence.

Volcano's near-term sales prospects remain less than thrilling, but bullish analysts believe it's only a matter of time before payers see the value of its devices, and forward-thinking acquirers like Abbott and Medtronic may well agree.

"They have always been viewed as an attractive target for a larger-cap company," JMP's Jose Haresco told Bloomberg. "They have a good core business. The products aren't commoditized. That's worth something to somebody."

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