(Bloomberg) — Royal Philips NV is working with Bank of America Corp. (NYSE:BAC) as it scouts for acquisitions in medical devices to expand its health care division, according to people with knowledge of the matter.
While the process is preliminary and no specific targets have been identified, Philips would consider smaller acquisitions as well as multibillion-euro deals over the next six to 12 months, said the people, who asked not to be identified because the plans are private. Shares of Elekta AB, a Swedish device maker, surged the most in more than five years on speculation that it might be a target.
The budget for purchases may increase depending on other potential asset disposals, the people said. The company also could use the proceeds from an initial public offering or sale of its lighting division. Philips is reviewing options for that business, which it plans to sell as soon as next year.
Philips is eyeing medical-device companies in areas such as radiotherapy, imaging and home care both in the U.S. and in Europe, the people said. In December, Philips agreed to buy Volcano Corp. for $1.2 billion to expand in catheter-based imaging of the heart and blood vessels as part of a wider refocus on more profitable markets such as medical gear.
Medical-device companies including Elekta and U.S.-based Varian Medical Systems Inc. could be targets for Philips, said Johan Unnerus, an analyst at Swedbank AB in Stockholm, who recommends buying Elekta stock. Elekta and Varian compete in making equipment for radiation therapy and radiosurgery.
“Elekta would be a really good fit for Philips and the two companies know each other well as they already have a project in common,” Unnerus said in a phone interview.
Elekta shares surged 9.1 percent to 62.50 kronor at 2:50 p.m. in Stockholm, valuing the company at 23.9 billion kronor ($2.8 billion). The stock’s intraday gain of 10 percent was the biggest since February 2010.
A spokesman for Amsterdam-based Philips declined to comment, as did a Bank of America spokeswoman. A representative for Elekta said the company hasn’t released any news today and declined to comment on any market speculation about the share price rise.
Bank of America’s Merrill Lynch unit will advise on everything from takeovers to strategy for the medical division, the people said. Philips also has added JPMorgan Chase & Co. as an adviser for the potential spinoff of the lighting unit, alongside Goldman Sachs Group Inc. and Rothschild, according to people with knowledge of the matter. Representatives of three banks declined to comment.
On July 27, Philips reported surging demand at its North American medical business, bolstering Chief Executive Officer Frans van Houten’s plan to split the 124-year-old company in two to focus on health care. Van Houten is counting on demand for technology that allows hospitals to analyze clinical data and patients to monitor health and nutrition on smartphones.
—With assistance from Alex Webb in Munich and Aaron Kirchfeld in London.