Time and space limits in the last Siemens post forced the future to be postponed. The future is now as Hearing Economics continues to clear its desk. Spoiler: nobody agrees yet on what the future holds for Siemens Audiology or its rascally stepchild Hearing USA.
Siemens Makes a Run for It
Fig
On May 7, 2014, Siemens announced that its Audiology business would be listed as a publicly traded company.{{1}}[[1]]If for no other reason than to keep it all in one place, here’s the full text of the announcement from US President Scott Davis, for anyone who cares to read it:
May 7, 2014
Dear Valued Customer and Business Partner,Today, Siemens AG announced that Siemens Audiology will become a publicly traded company. This is exciting news for our customers and business partners for several reasons, including greater management focus on audiology, increased flexibility to meet your needs, and entrepreneurial freedom to respond to changing market conditions.
- The hearing aid industry represents a very attractive market whose growth is driven by global demographics, technological innovations and the ever increasing requirements for the highest quality hearing care.
- Siemens Audiology has demonstrated a strong and improving performance record in this market, stemming from our compelling micon platform and the ubiquitous Siemens brand having the highest recognition among hearing care providers and patients.
- Though we’ve been an important contributor to the success of Siemens AG, we can better realize our full industry potential as an independent company. For example:
- All relevant hearing instrument manufacturers are industry “pure plays” that are either publicly listed or privately owned, and not part of a large conglomerate.
- Our go-to-market strategies and customer requirements are unique to the hearing industry, compared to other Siemens AG businesses such as power generation and distribution.
- The growth areas of the hearing industry are very different from other Siemens AG businesses and have little synergies with these.
I hope that you, our valued customer and business partner, share my excitement for the decision to list Siemens Audiology as a publicly traded company. This allows us to build on the natural strengths of our business, further focus our management attention, and invest into the most promising growth areas of the hearing industry.
Most importantly, I want to emphasize that this transition will not affect how we do business with you: We will continue to further improve in order to remain your preferred partner of choice. We are confident that we will be able to serve you even better upon completion of our listing as a publicly traded stock.
On behalf of the Siemens Audiology team, we look forward to continue building our success together. Please feel free to ask your Siemens representative or myself if you have any questions or comments.
Best Regards,
Scott Davis
CEO
Siemens Hearing Instruments [[1]] “Going public” is another way of saying that Siemens wants to get out of its investment by selling. Figs 1 and 2 are snapshots from Siemens’ business overview on May 7.
Note that “Going Public with Audiology” is the top priority in Siemens Healthcare business (Fig 1). There was speculation in 2013 that Siemens might take the entire Healthcare sector public, but only Audiology ended up on the block.
Getting shown the door is probably the only time that the teeny-tiny Audiology section ever made the pages of a Siemens report. Audiology is 1 of 5 sections of Siemens Healthcare, many pay grades below MRI machines. Siemens won’t miss it.
Figure 2.
Fig 2 spins the proposed divestment, touting Audiology as a “leading global pure play hearing aid player.” Is that a good thing? What with the rest of the Big 6 working hard at forward integration, it’s difficult to know how being a pure play is an enticement in today’s market. Whatever. Siemens notes that hearing aids are “far” from its core business. Time to sell.
Recent posts leave little doubt that Siemens is on the right track. David Kirkwood posted an analyst’s view that Siemens is most at risk of the Big 6 in the US market, what with Rexton’s rapid one-year decline (65% to 47%) at Costco and further downward trending predicted as Phonak ascends in that market.
Besides which, Siemens would rather bet on growth of the offshore wind industry than hearing aid growth. The Audiology sale announcement was made on the same day that Siemens announced it was moving its power-generating operations headquarters to the US. Too bad Siemens didn’t read Kirkwood’s report of potential deleterious effects of wind turbine noise on hearing. They might have seen an opportunity for sales synergy, with increasing hearing aid sales in areas serviced by wind turbines.
SOBs and Cattle Rattles
No word yet on a suggested opening bid (SOB), though readers may recall that an attempted sale in 2010 went to a second round of bidding but Siemens shut it down when bids didn’t hit a reported target of $2.7 billion. There was speculation then that a triumvirate of European retailers (Geers and Amplifon) and an unnamed private investment firm might make the purchase, “creat(ing) a globally integrated hearing aid manufacturer/distributor generating about $2.11 billion in annual sales.”
Three years later, in late August 2013, one of the Usual Suspects appeared on the scene to broker a deal. Valentin Chapero Rueda, formerly of Sonova, formerly of Siemens, latterly of Valamero Holding AG (a Swiss start-up investment company) was working to broker a deal in which a private investment company would make the purchase and Mr. Chapero would provide leadership. That has yet to happen, but no one has said it won’t.
The private investment company remains anonymous, though it’s worth mentioning that Kolberg Kravis Roberts & Co. LP (KKR) was in the second round running back in 2010. KKR bought Panasonic Healthcare in October 2013 and finalized the deal on April 3 of this year. From comments (below) that came in after this was posted, it appears that Panasonic’s hearing aid business did not go to KKR so maybe that player is no longer looking to get into the hearing aid business? Those who are better informed than the notes on my desk are urged to continue contributing to this discussion and improving this and future posts.
Who Indeed?
As usual when it comes to Siemens and HearUSA, there is more on the desk than can fit into a single post. The future will continue but not for several weeks. Tune in for speculation, gossip, and insider commentary from Deep Throats about who wants and who doesn’t want Siemens. And there’s always HearUSA to keep the pot boiling, if not encourage buyers.
photos courtesy of green book blog and basement rejects
