Volcano Corporation (VOLC): GAMCO and Affiliates Raise Stake to 6.90%

GAMCO Investors and several other funds managed by Mario Gabelli have increased their activist stake in medical equipment company Volcano Corporation (NASDAQ:VOLC) to 6.90%, from 5.86% according to a filing with the Securities and Exchange Commission. The increased stake in the company, which was recently purchased by Royal Philips, represents an additional 538,493 shares, which are divided between Gamco, Gabelli Funds, GSI, and Foundation. In total, the four funds now own 3.56 million shares in Volcano Corporation, with the majority being owned by Gabelli Funds (2.30 million shares).

Mario Gabelli

GAMCO Investors, originally known as Gabelli Asset Management Company, was founded in 1977 by Mario Gabelli, and went public in 1999. Gabelli owns a 50% stake in the company he founded, while Microsoft Corporation (NASDAQ:MSFT)’s co-founder Bill Gates was one of the first investors in the newly-public company, and maintains a 1.3% stake in the firm through Cascade LLC. GAMCO has been a consistent performer since its inception, topping the S&P by nearly 2% annually on average, and currently manages over $46 billion in assets.

Gabelli recently acquired a strong position in The Pantry Inc (NASDAQ:PTRY), disclosing a more than 5% stake in the company at the end of December. Like Gabelli’s activist stake in Chiquita Brands International Inc (NYSE:CQB), a company which was recently acquired in a merger agreement involving both Cutrale Group and Safra Group, the investment by his funds in Volcano Corporation came as talks began heating up about a possible merger or takeover involving the company. Gabelli’s funds have amassed their position in Volcano Corporation entirely within the last quarter, as they reported no holdings in the company as of their most recent 13F filing.

Funds which did have strong positions in Volcano as on September 30 include Stephen Dubois’ Camber Capital Management with just over 5 million shares, Glenn W. Welling’s Engaged Capital with 2.13 million shares, and Israel Englander’s Millenium Management with 1.12 million shares.

Several Volcano Corporation insiders have sold some of their position in the company within the past month, including the company’s executive vice president Joe Burnett, CFO John Dahldorf, and executive vice president of human resources Heather Ace. All three made sales on January 2 at $17.88. The sales came two weeks after Volcano made a monumental leap in value of over 50%, from $11.49 to $17.81, on news that the company would be purchased for $1.2 billion by Royal Philips. It has clung steadfastly to the $17.80 level since, and is currently trading at $17.89. The buyout will pay stockholders $18.00.

Just days after those insider sales, an investigation into the proposed buyout was launched by Rigrodsky & Long, P.A., against the Volcano board of directors. The investigation aims to uncover whether the board made enough of an attempt to shop the company and maximize its value for shareholders before settling on their agreement with Royal Philips.

While the increased stake by GAMCO may not amount to anything significant in this particular case, given the impending sale of the company, it’s important to pay attention to hedge fund’s investment in companies. They often play a pivotal role in affecting the company’s fortunes, both good or bad, or revealing perceived value in the company by some of the brightest investment minds in the world.

In the case of GAMCO, some of their recent investments have included the above-mentioned positions in The Pantry and Chiquita Brands, as well as a 17.97% position in CIRCOR International, Inc. (NYSE:CIR), which has since been unable to reverse its downward slide, falling another $4.14 since GAMCO’s most recent move on the stock.

Disclosure: None