By Aaron Kirchfeld Nov. 27 (Bloomberg) — Siemens AG’s hearing aid business, valued at as much as 3 billion euros ($4.5 billion), is drawing interest from private-equity firms including KKR & Co. L.P. and BC Partners Ltd., two people familiar with the matter said. Several financial investors have contacted the Munich-based company about buying the unit, said the people, who requested anonymity because the process isn’t public. Siemens has been in contact with investment banks about options, and hasn’t decided whether to sell the unit or conduct an initial public offering, though an exit from the business is likely, the people said. Siemens claims the No. 1 position in the global hearing aid market by units manufactured. It trails Sonova Holding AG of Switzerland and William Demant Holding A/S of Denmark by market share, according to Sonova. Siemens, Europe’s largest engineering company, is weighing a retreat from the industry to sharpen its focus on energy, transport and infrastructure, as well as on medical diagnostics tools, the people said. In addition to private-equity firms, makers of medical equipment may also be interested, the people said. Antitrust hurdles would bar Sonova and William Demant from a takeover, the people said. Siemens spokesman Constantin Birnstiel declined to comment, as did spokespeople for KKR and BC Partners in Germany. High Margins “Siemens hearing aids is attractive because the sector has relatively high margins and the business could be further improved by a new owner,” said Daniel Jelovcan , a Zurich-based health-care products analyst at Helvea AG. He estimates the unit could be valued at 2.5 billion euros to 3 billion euros, based on estimated sales of 680 million euros and peer valuation. Siemens, which also makes high-speed trains, power grids and medical scanners, doesn’t disclose sales for its hearing aids. The company has been making the products for more than 100 years , and the business is based in Erlangen in southern Germany, home to some of Siemens’s largest production sites. The unit may fetch 2 billion euros to 3 billion euros in a sale, the people said. The engineering company will likely pursue a so-called dual-track process of seeking a buyer while simultaneously preparing an IPO for 2010, the people said. The company followed a similar strategy with its VDO automotive division, which it sold to Continental AG for 11.4 billion euros in 2007 after simultaneously holding sales talks and preparing an IPO. Past Deals KKR has done deals with Siemens in the past. The private- equity firm run by Henry Kravis and George Roberts bought Wincor Nixdorf AG, a maker of bank machines, in 1999 from Siemens, as well as seven engineering units for 1.69 billion euros, including Demag Cranes AG, in 2002. Sonova Chief Executive Officer Valentin Chapero said on Nov. 14 it “wouldn’t be surprising” if Siemens sold its hearing-aid unit because it’s not “well adapted” to the rest of the German company’s business. The Swiss company has gained 87 percent so far this year, valuing Sonova at 7.77 billion Swiss francs ($7.74 billion). William Demant has a market value of 21.3 billion Danish kroner ($4.3 billion) after doubling in value in the last year. Other competitors include closely held Kind Hoergeraete, based in Hanover, Germany, and Fielmann AG , the German eyeframe manufacturer, which is branching out into hearing aids as an ageing population and ear damage caused by loud music increase the number of people with hearing disabilities. Hermann Requardt , the chief executive officer of Siemens’s health-care division, said on Sept. 29 at a meeting with analysts and investors that the hearing aids are “a very solid business and a strong contributor.” To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net
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Siemens Hearing-Aid Division Said to Draw Interest From KKR, BC Partners
