|
SHARES in hearing implant manufacturer Cochlear have surged on speculation the company is poised to make a $2.8 billion play for the hearing aid division of Germany's Siemens.
Cochlear shares closed up $1.18 yesterday to $66.58 -- a gain of almost 2 per cent and their biggest one-day rise in over a month -- after offshore reports that Cochlear was among the bidders for Siemens' hearing aid unit, on which binding bids are due late next month. Cochlear's bid is reportedly being undertaken as a joint venture with private equity firms Hellman & Friedman and Kohlberg Kravis Roberts, the company that led a consortium of private equity buyers in an unsuccessful bid for Coles in 2006. A Cochlear spokesman added fuel to the talk by refusing to comment yesterday, although chief executive Chris Roberts was reported as saying earlier this month that the company was not involved in the sale process. Start of sidebar. Skip to end of sidebar.
.End of sidebar. Return to start of sidebar.
Given the share price rise yesterday, a query from the Australian Securities Exchange appears certain and the situation might be clarified when trading resumes tomorrow. Analysts were unsure about the likelihood for an acquisition, with one saying that while Cochlear had the balance sheet strength to make the purchase, it would essentially be a backwards step for the company. "Cochlear enjoy a unique position in the medical technology sector -- they've built a niche that is virtually unassailable, so why would they go back and buy old technology that has been around for decades?" he said. Cochlear dominates the market for bone-anchored hearing systems, which unlike conventional hearing aids are implanted surgically in the bone behind the ear. "They have a reputation for excellence in the development of cochlear implants, their technology is vastly different from that which is represented by conventional hearing aids -- they don't operate in the partial deafness market at this stage so it just wouldn't make sense for them to be looking at this," the analyst said. Deutsche Bank analysts estimate that Siemens accounts for about 25 per cent of global hearing aid sales, equivalent to revenue of about E700 million to E900m ($1.09bn-$1.4bn), with earnings before interest, taxes, depreciation and amortisation for 2010 estimated at about E170m. Deutsche has also described Siemens' hearing aids as lagging the rest of the market by up to five years in terms of technology, thus requiring any buyer to make significant investments in research and development and distribution. However, a similar deal combining new and old technology was executed in November when German hearing aid manufacturer Sonova Holding bought Cochlear's main competitor, Advanced Bionics for $489m. Credit Suisse analysts expect Advanced Bionics to be a source of increased competition for Cochlear over the medium to long term. "While it is likely to take several years for maximum synergy capture to be achieved, we believe Advanced Bionics under Sonova's control will prove to be a more focused and successful competitor, and could potentially erode Cochlear's dominant market share," the analysts said. Cochlear's market capitalisation would more than double from $3.7bn to about $9bn if the deal was completed, and the company would need to raise significant funds through debt or equity to make the purchase, according to UBS analysts. Cochlear has forecast a positive outlook despite continuing uncertainty in the global economy. Chairman Tommie Bergman told the annual meeting in October that the company was well positioned to drive earnings growth because of a range of new products that had just been launched. "Record investments in research and development, and ongoing investment in growth initiatives and internal capabilities, will support Cochlear's positive development," he said. "Although the world economy may still be characterised by uncertainty, in the financial year 2010 the outlook for Cochlear's business is positive." Mr Bergman said the company was able to achieve record revenue, profit and cashflow despite the unprecedented global economic turmoil and extreme volatility in foreign exchange markets last year. (by theaustralian.com.au)
 |
Subscribe to this comment's feed
Protected Music Converter is a software which allows you easily convert your protected (or unprotected) music files to most frequently used unprotected formats (MP3, OGG, unprotected WMA)
iSofter DVD to MP4 Converter is fast, easy to use DVD to MP4 converter software which helps you convert your video DVD to MP4 or converting VOB files to MP4 (MPEG-4), including DVD to MP4, VOB to MP4 converter.
