HearUSA Lashes Back At Siemens With A Lawsuit And Gets Support From A Principal Investor

HearUSA to Siemens: Right back at you! Responding to an SEC filing in which Siemens Hearing Instruments threatened an unfriendly takeover following a dispute over the terms of a loan payment, hearing-aid retail chain HearUSA said it filed a suit in the Supreme Court of the State of New York seeking a declaratory judgment to prevent Siemens from making good on its threat. At the same time, Arcadia Capital Advisors, one of HearUSA’s largest institutional investors, issued a news release supporting HearUSA and accusing Siemens of “a ruse so that they can steal the company at depressed valuations.”

In a Schedule 13D filing on Jan. 18 with the U.S. Securities and Exchange Commission (SEC), Siemens said it was considering exercising an option to buy out HearUSA following the Orlando, Florida-based company’s failure to make a timely debt payment. HearUSA Chairman and CEO Stephen Hansbrough responded immediately, scolding Siemens for a “negative and heavy-handed approach,” before following up with its announcement this week of the New York Supreme Court suit. Arcadia Capital Advisors chimed in with its own public statement, saying Siemens “is choosing to play the role of a bully” and accusing Siemens of trying to acquire HearUSA at a fire-sale price: “The recent SEC filing by Siemens smells strongly of market manipulation,” said Arcadia Capital Managing Director Richard S. Rose. “We believe their actions are a self-serving scare tactic, so don’t be surprised if Siemens comes out with a low-ball offer for the company.”

The hardball tactics are unusual in a hearing-aid industry where conflicts are more often resolved out of the public eye. But it does indicate the degree of tension that can arise between manufacturers and resellers at a time when each link of the supply chain is attempting to maximize its own profitability. As a condition of its backing from Siemens, HearUSA is obligated to stock and sell Siemens Hearing Aids, making the popular retailer a near-captive supplier for Siemens through the network of HearUSA stores and affiliates across the U.S. By acquiring HearUSA outright, Siemens could capture more value from the channel while profiting from HearUSA’s recent progress in the market, which includes an exclusive referral relationship with the massively powerful AARP senior organization in the U.S.