Numerous reports came in on Tuesday, suggesting that the German engineering group is about to sell its hearing-aids business. The private equity firm EQT looks to be the frontrunner and the deal is expected to be worth around $2.5 billion.
According to a Reuters report, other private equity companies have been interested in Siemens Audiology Solutions. Sources have revealed that EQT submitted binding bids together with fellow private equity company Permira, as well as the Danish hearing-aid manufacturer, GN Store Nord.
Siemens, which is Europe’s biggest engineering company, had earlier this year announced it was considering listing its audiology unit. The declining equity markets proved too unattractive and the sources revealed in August that Siemens is looking for new ways to divest the business. It is thought that the Siemens Audiology Solutions division’s annual sales fall around $1 billion, with core earnings over $200 million.
Despite the reports of the deal, Reuters’ sources close to the matter hinted the company might not have surrendered the possibility of initial public offering (IPO). News organisations are also reporting that as the talks are still on going, the final details for the deal might change.
According to Bloomberg, the earlier plans of listing would help the business to grow. Bloomberg reported the Chief executive officer for the company, Joe Kaeser, saying “such a move would help the business to expand as an independent entity”. The company also hopes to close the gap on competitors, such as Switzerland’s ABB and the US-based General Electric. Both companies are currently ahead of Siemens in profitability.
Siemens has tried to sell its Siemens Audiology Solutions four years ago, but failed to find a buyer. The company has successfully sold or spun off other assets in the previous years. For example, earlier this year, AEA Investors LP completed acquisition of Siemens Water Technologies.
Value Walk reported that EQT has tried to obtain numerous corporate assets this year, especially in the health care sector. The Swedish-based firm earlier launched a bid for Nobel Biocare Holding AG, which is a Swiss-based dental implant manufacturer. EQT lost the bidding war to Danaher Corp.
Siemens on the other hand is looking to sell its assets in the health care sector and focus more on equipment for energy generation and supply. Last month, the company acquired Dresser-Rand Group Inc. for $7.6 billion. This Houston-based company manufacturers oil field equipment.
Buyout firms can be at a disadvantage against companies in competitive bidding, as companies often find it easier to find extra financing and can even cut costs by integrating acquisitions within existing business structure. Smaller PE companies like EQT have previously suffered from this disadvantage.
As the reports reached the stock market, Siemen’s stock price rose 2.7%. The stock had previously been in a 16% decline since the start of the year.
Representatives for Siemens and EQT declined to comment on the news. It remains to be seen whether the current market conditions help to push the deal through or whether Siemens prefers to opt for a listing after all.