Morning Commentary: Volcano jumps on Philips takeout news; MGM in trade with lower shares

By Rebecca Melvin

New York, Dec. 17 – Volcano Corp. was the centerpiece of early convertibles trade on Wednesday after news that the San Diego-based medical-device maker has agreed to be bought by the Netherlands’ Royal Philips for $18.00 per share, or $1 billion in equity. The transaction is expected to close in the first quarter.

The Volcano bonds immediately shot up to just under par from the 80s after the news.

Volcano’s 1.75% convertibles due 2017 were quoted at 99.125 bid, 99.375 offered at late morning. That was up from about 87 previously.

Volcano shares surged 55% to $17.83.

Volcano’s catheter-based imaging and measurement business advances Philips’ strategy in image guided therapy, according to a news release.

Philips expects the transaction to accelerate sales growth as a combined business as it “optimally positions it to address unmet needs in the €4 billion image-guided therapy market.”

Sharply lower shares of MGM Resorts International pulled the convertibles of the Las Vega-based casino operator into trade. The MGM 4.25% convertibles due 2015 were down more than 4 points on an outright basis at 105.28, according to Trace data.

Elsewhere, convertibles were mainly quiet as market players awaited the Federal Reserve’s policy statement and press conference Wednesday afternoon at the conclusion of the central bank’s two-day open market committee meeting.

The Fed’s statement will be watched for clues as to how the Fed sees the slowdown in many international economies and depressed oil prices affecting the U.S. economy going into 2015.

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