Sivantos, Widex in $8 bn merger to create No.3 in hearing aids
Hearing aid makers Widex and Sivantos are merging to create an industry number three that can invest more in digital devices and step up the challenge to market leaders Sonova and William Demant .
Germany’s Sivantos, formerly known as Siemens Audiology, and Denmark's Widex said on Wednesday that they had agreed to form a company worth more than 7 billion euros ($8.3 billion), including ^3 billion in debt.
Makers of hearing aids, whose customers are typically in their seventies and eighties, are benefiting from rising demand in ageing societies, but some are facing challenges adapting to the digital age and the demands of more tech-savvy generations.
“Innovation is one of the biggest areas of growth, and this is accelerating because we have a new group of consumers that is coming with a completely different mindset,” Sivantos Chief Executive Ignacio Martinez told Reuters.
The merger will enable the enlarged company to invest more in research and development (R&D) in areas such as bluetooth and sensors, he said.
One of the technologies hearing aid makers are hoping will attract younger customers is the capture of healthcare data using sensors in the devices.
The ear is a good source for capturing data such as heartbeats and blood pressure and the technology could be available within the next three years, according to Morgan Stanley research. Funds of Swedish private equity firm EQT, including co-investors, will own a majority of the merged group. The Topholm and Westermann families, who currently own Widex, will retain large stakes and be the largest shareholder group. EQT bought Sivantos from Siemens in 2015 for more than 2 billion euros.
The combined group, the name of which has yet to be decided, will have ^1.6 billion in annual sales and employ more than 10,000 people worldwide, including 800 in R&D.
Bernstein analysts estimate thedeal has an enterprise value (EV) — equity plus debt — of 20 times the combined companies' 2017 earnings before interest, tax, depreciation and amortisation (EBITDA).
Denmark's GN Sore Nord, one of the world's four biggest hearing aid suppliers, is trading on an EV/EBITDA ratio of about 17 times, with William Demant on 23 times and Sonova 22 times, they added.
Widex and Sivantos declined to comment on the valuation or to disclose the distribution of stakes. They described the deal as a "merger of equals", indicating no cash was involved. The merger is likely to push back EQT's plans for a stock market listing of Sivantos by a few years, EQT Germany chief Marcus Brennecke indicated in an interview with German daily Frankfurter Allgemeine Zeitung.
“We keep our holdings for four to five years on average,” the paper quoted Brennecke as saying, adding that the merger with Widen had reset the clock on the holding to zero. He still said that an IPO was "very, very likely" eventually. Widex chairman Jan Topholm told Reuters: "It is very possible that there will be an IPO, but the only thing we know is that we will continue to be a large shareholder.”