Siemens Spins Off Healthcare Business, Sells Audiology Unit

Siemens has spun off its healthcare business as a separate legal unit and sold its hearing-aid business to private-equity firm EQT Partners and Santo Holding, the investment arm of Germany’s Strüngmann family, in a deal valued at 2.15 billion euros ($2.68 billion).

EQT will acquire a majority stake in Siemens Audiology Solutions, a division of Siemens Healthcare, with Santo Holding acting as a minority co-investor. Siemens will retain a preferred-equity investment of 200 million euros in the business. Audiology Solutions posted 693 million euros in revenue for the most recent fiscal year.

EQT’s goal is to position the hearing-aid business for an eventual initial public offering of stock, Marcus Brennecke, EQT’s partner for German operations, told The Wall Street Journal. “It’s an acquisition for growth, not a cost-cutting effort,” he said.

Siemens had initially announced plans in May to publicly list the company. The announcement came as Siemens posted a 44 percent jump in net profit for the fiscal fourth quarter, boosted by strong growth in its industry and transportation divisions, as well as a recovery from high one-time restructuring charges during the same period last year. But the company issued a cautious growth forecast for 2015, tempered in part by geopolitical tensions and a weakening European economy.

Net profit totaled 1.45 billion euros for the quarter ended Sept. 30, up from 1.01 billion euros a year earlier and in line with analysts’ expectations. Analysts had forecast net profit of 1.49 billion euros, according to a Journal poll.

New orders rose 2 percent, adjusted for currency and portfolio effects, to 20.73 billion euros. Revenue increased 1 percent to 20.62 billion euros, weighed down by declining growth in the company’s energy business.

Siemens expects revenue to remain flat next year, with basic earnings-per-share forecast to increase 15 percent, compared with earnings per share growth of 25 percent in the just-ended year.

The company proposed a shareholder dividend of 3.30 euros per share.

The sale of the Audiology Solutions unit follows the company’s recent decisions to shed two other parts of its healthcare business: hospital information-technology and microbiology.

The planned divestments have contributed to speculation that CEO Joe Kaeser could dispose entirely of the company’s healthcare business—its most consistently profitable operation—as he moves to sell noncore businesses and focus more on energy.

Kaeser last month separated Siemens Healthcare operationally from the rest of the company in a move analysts have said could allow him to more easily dispose of it through a spinoff to shareholders, an IPO or an outright sale. And though he insisted the healthcare business would remain part of Siemens as a “company within the company,” he also announced plans to reorganize Siemens Healthcare as a separate legal entity in Germany and in other countries to “give it greater freedom of action.”

“As a separately managed business, healthcare will be better able to respond more efficiently to trends and to the expected paradigm shifts in the industry,” said Kaeser.

Siemens Healthcare’s fourth-quarter profit fell 1 percent to 611 million euros from 616 million euros last year due to lower earnings in its imaging and therapy-systems businesses. Health-care revenue and new orders rose 3 percent and 1 percent, respectively.

Siemens’s overall fourth-quarter growth was held back by weak results in its energy business. The energy sector posted a 28 percent decline in profit due to losses in the wind-power division, and a 5 percent fall in orders, in part because of reduced sales of large gas turbines in the Americas.

Kaeser has moved to bolster the company’s energy operations over the past year through planned acquisitions of U.S.-based oil-equipment manufacturer Dresser-Rand Inc. and the energy business of United Kingdom-based Rolls-Royce Holdings Plc.