Siemens confirmed it is selling its hearing aid business to a group of private equity investors led by EQT Partners in Sweden, backed by the Wallenberg family, and by Germany’s Strungmann family, for €2.15 billion ($2.57 billion USD) plus future earn-out payments based on the company’s performance. The sale is expected to close in the first calendar quarter of 2015.
Siemens had previously announced it would spin off its Audiology Solutions Business into a separate publicly held company but said in today’s news release that “the very attractive offer made by the two investors” led to the private sale instead. “Not only is the transaction excellent from a financial perspective; we’re also convinced that both investors have a clear growth strategy for further developing the hearing aid business over the long term,” said Hermann Requardt, CEO of Siemens Healthcare and member of the Managing Board of Siemens AG. Siemens will remain invested in the hearing aid business with preferred equity of €200 million. In addition, Siemens will have a seat on the board of the buyer group. Under the terms of the agreement, the new owners will also be allowed to continue using the Siemens product brand for the hearing aid business over the medium term.
“The Siemens audiology business has a very strong heritage for innovative, high quality products and we have been particularly impressed with the strong track record over the last couple of years. EQT is fully committed to supporting the management and employees in developing the business further,” said Marcus Brennecke, Partner at EQT Partners.
EQT is a growth-oriented investment company managing around €22 billion in assets and with proven expertise in the healthcare and medical engineering sector. EQT is also the owner of LBX, one of the largest pharmacy chains in China’s growth market. Germany’s Strüngmann family of entrepreneurs is also known for its focus on long-term growth. In 1986, the family founded Hexal, which has since become Germany’s leading provider of generic drugs.
The sale eliminates the uncertainty that has surrounded Siemens Hearing Instruments since the parent company started floating the idea of a spinoff several years ago. Siemens Hearing Instruments is one of the “Big-Six” hearing aid suppliers that control more than 80 percent of the global hearing aid business. In fiscal 2014, Siemens’ globally active audiology business, with over 5,000 employees, generated revenue of €693 million and a reported EBITDA (earnings before interest, taxes, depreciation and amortization) of €145 million.
With €1.1 billion of equity remaining in the business after the sale, the Siemens audiology business should have the capital and independence it needs to invest in new products and maintain its competitive position against the other top hearing aid suppliers.
At the recent 59th International Congress of Hearing Aid Acousticians (EUHA) in Hanover, Germany, Siemens introduced its new binax hearing aid platform based on binaural technology. The technology enables new hearing aids to share and exchange audio signals in real time to reproduce more natural hearing processes for both ears.