WEST PALM BEACH, FL-Audiology Distribution, LLC, a wholly owned subsidiary of Siemens Hearing Instruments, was the winner in an auction held here July 30 for the assets of HearUSA, Inc. HearUSA, one of the nation’s largest providers of hearing healthcare, went up for bids under Chapter 11 bankruptcy proceedings. The bid by Audiology Distribution includes aggregate consideration of approximately $129 million plus a waiver by Siemens of distribution on 6.4 million shares of HearUSA common stock owned by Siemens.
The U.S. Bankruptcy Court for the Southern District of Florida approved the sale on August 1, and the transaction is expected to close by the end of August.
LAST-MINUTE ENTRANT
Until a few days ago, it appeared that William Demant, the Danish parent company of Oticon, would purchase HearUSA. Facing large debts and a lawsuit filed by Siemens, its principal supplier of hearing aids, HearUSA had filed for bankruptcy under Chapter 11 on May 16. Almost immediately, Demant bid $70 million for its assets, which had an estimated value of $80 million. HearUSA, which was founded in 1986, owns 134 hearing care centers in 10 states and has a network of more than 1800 hearing care providers
However, last week, Siemens announced that it would try to buy HearUSA, with which it had a close relationship dating back more than a decade. In return for a $50 million revolving credit, HearUSA had been purchasing 90% of its hearing aids from Siemens-owned companies. Recently, though, the relationship soured in a dispute over proceeds from the sale of HearUSA’s Canadian business in 2009. Siemens terminated the credit agreement and demanded immediate payment from HearUSA, which insisted it was current on its payments.
A little over half of the estimated $129 million purchase price is a cash payment of $66.8 million, which includes repayment or assumption of the $10 million financing provided by William Demant. It also includes payment of cure costs for assumed contracts, the assumption of various liabilities of HearUSA and subsidiaries, and the assumption of the company’s existing supply agreement with Siemens.
The purchase of HearUSA means that Siemens will not lose a major buyer of its products. Unlike some of its largest competitors, including Demant, Sonova, and ReSound, Siemens had not previously purchased large hearing aid distribution networks in the U.S. With this purchase, Siemens also takes over a nationwide marketing deal with AARP, which HearUSA made in 2009.
For an objective and in-depth look at HearUSA and its unique history, go to Holly Hosford-Dunn’s Hearing Economics blog at hearinghealthmatters.org.
