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 Germany's Sivantos, formerly known as Siemens Audiology, and
Denmark's Widex will create a company worth more than 7 billion
euros ($8.28 billion), including some 3 billion euros in debt.
Makers of hearing aids, whose customers are typically in their
seventies or eighties, are benefiting from rising demand in aging
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 would enable the company to invest more in research and
development, he said.
Swedish private equity firm EQT will own a majority of the merged
group in which the Tøpholm and Westermann families, who currently
own Widex, will retain large stakes. EQT bought Sivantos from
Siemens in 2015 for more than 2 billion euros.
The companies declined to comment on the relative valuation or to
disclose the distribution of stakes. The deal was branded a "merger
of equals", indicating that no cash was involved.
The combined group, whose name has not been decided, will have 1.6
billion euros in sales and employ more than 10,000 people worldwide,
including 800 in R&D.
LISTING POSSIBLE
The merger pushes back EQT's plans for a stock market listing of
Sivantos by a few years, as the focus will now be on integrating the
companies and advancing their digital technology, a person close to
the matter said.
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"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," Widex
chairman Jan Topholm told Reuters.
Sonova has been criticized for missing an opportunity when GN Store
introduced direct-streaming hearing aids for wireless devices in
2014, but last year closed that gap.
Sivantos and Widex also have similar technologies.
Analysts at Bernstein said that increasing R&D spend may allow
Sivantos and Widex to draw ahead of peers and that the new entity
may be happy to experiment with new channels and approaches to
market.
"With around a third of Demant and Sonova sales coming from owned
retail, this would be bad news particularly for those players,"
Bernstein said in a note to clients.
Shares in Sonova fell 2.9 percent, while GN Store Nord traded down
1.8 percent at 0922 GMT.
Sydbank analyst Morten Imsgard said Sonova, William Demant and the
newly formed company would each have an around 25 percent market
share, followed by GN Store with 16 percent and Starkey with 9
percent.
(Reporting by Stine Jacobsen and Arno Schuetze; editing by Jason
Neely and Alexander Smith)
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