Siemens to sell healthcare business
Engineering firm Siemens Ltd on Friday announced the sale and transfer of its healthcare business to a subsidiary of its parent Siemens AG for Rs.3,050 crore. The Siemens board of directors approved the sale and transfer of the healthcare undertaking as a going concern on a slump sale basis, after obtaining the requisite regulatory, statutory and shareholder approvals, to Siemens Healthcare Pvt. Ltd.
A slump sale is the transfer of one or more undertakings for a lump-sum consideration without values being assigned to individual assets and liabilities. The consideration for the proposed transaction, recommended by the audit committee, is based on the valuation done by two independent valuers- Deloitte Touche Tohmatsu India Llp and KPMG India Pvt. Ltd, Siemens said in a statement.
Citigroup Global Markets India Pvt. Ltd is acting as the transaction adviser to Siemens, which is listed on Indian bourses. Sunil Mathur, managing director and chief executive officer, Siemens, said this transaction follows parent Siemens AG's global strategy of managing its healthcare business under a separate company.
"Over 85% of Siemens' healthcare revenues are currently derived from products imported from Siemens AG. Significant management focus, including investments will be needed in finding appropriate products and solutions to meet the growing demands of the Indian market," Mathur said. "As there are limited synergies between the healthcare and other businesses of Siemens Ltd, this transaction will enable Siemens Ltd to increase its focus on, and capital allocation to power generation, transmission and distribution, mobility, industrial automation and smart cities segments while enabling Siemens AG to further strengthen its focus on the healthcare segment in India, by aligning it with its global strategy and management framework," Mathur said. The board said the parent has decided to offer 50% of the sale proceeds, after applicable capital gains tax and dividend distribution tax, as a special dividend.
"Siemens is at it again, selling off businesses to its parent," said Shriram Subramanian, founder of InGovern Research Services, a proxy advisory firm. "Valuation of the business needs to be closely scrutinized by investors given that Siemens has a habit of short-changing investors. It isn't clear as to why there cannot be focus on healthcare sector as a business division within the listed company," Subramanian said. Mathur denied any such motive behind the move and said that the company engaged two firms for valuing the business.
He pointed out that Siemens Ltd's healthcare undertaking is dependent on the parent and its subsidiaries for products and technical know-how while requiring significant long-term investments for localization of products and solutions.