NEW YORK (The Deal) -- Royal Philips on Wednesday unveiled a $1 billion offer to buy San Diego healthcare imaging company Volcano (VOLC) as CEO Frans van Houten pivots the Dutch electronics company towards medical devices.

Philips, of Amsterdam, has agreed to pay $18 per Volcano share, a 57% premium to the stock's Tuesday close. Shares on Wednesday were surging 55% to $17.85.

"Our combined sales forces will be able to capture immediate cross selling opportunities, while our joint R&D teams will be able to develop new solutions to address significant unmet needs in the minimally invasive treatment of cardiovascular diseases," van Houten said in a statement.

The executive in September said he hoped to merge his company's consumer and health activities into a single division dubbed HealthTech. Van Houten hopes to capitalize on a push among worldwide governments to cut healthcare costs by demanding healthcare providers offer more comprehensive services rather than individual products or treatment. Companies like Philips will be expected to provide products with extended capabilities to simplify purchasing.

Wednesday's agreement follows September criticism of Volcano's board from 5.1% Volcano shareholder Engaged Capital, an activist investor. Engaged had criticized the target for missing several opportunities and making ill-conceived acquisitions. The investor called for a strategic review and Volcano pledged to consider Engaged's concerns.

Volcano's products are introduced into patients' vascular system and provide information on possible disease, making diagnoses simpler. The image-guided therapy market is estimated by Philips to be worth €4 billion ($4.99 billion) annually.

The public offer is expected to be completed and the deal closed in the first quarter. Philips' Bert van Meurs will become head of the enlarged image-guided therapy division.

In the third quarter, Volcano had revenue of $97.5 million, a 2% increase, allowing it to shrink its loss by 6% to $8 million. The company blamed currency conversion and acquisition costs for its continued loss. Its most recent acquisition was a May agreement for privately held peripheral artery disease treatment maker AnteroMed for $115 million in cash at closing and $15 million in milestone payments.

Philips took financial advice from a Lazard team of Larry Slaughter, Andrew Dickinson, Navin Bhargava and Wouter Han. Its legal advice came from a Sullivan & Cromwell team including Matthew Hurd and Rita-Anne O'Neill. Barbara Borden and Matthew Browne at Cooley provided Volcano's legal advice.