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Siemens reportedly courting bankers for Healthineers IPO

by Thomas Dworetzky, Contributing Reporter | January 26, 2017
Business Affairs
Siemens Healthineers might go public in late 2017 if the markets hold up – and it looks like German industrial giant Siemens may already be shopping for bankers to help with an IPO.

"Goldman Sachs will very likely emerge as one of the global coordinators of the Healthineers IPO," an unnamed source told Reuters.

The health care business could be valued as high as $40 billion, according to Reuters.

At present, said three sources, plans call for investment bankers to get their shot to pitch for slots in the deal sometime in April.

Neither Siemens nor Goldman Sachs would go on record in the matter, according to the news wire, which noted that the Healthineers are the most profitable of all businesses in the Siemens family.

Barclays Capital, said Reuters, puts a multiple to the health care enterprise's worth at 15 times 2018 earnings before interest, tax and amortization, or EBITA, vs. 10.4 times for the entire Siemens group.

"This is quite a high multiple, factoring the strong cash generation and stable margin,” Barclays analyst James Stettler told the wire service, adding, “However, top-line growth has been muted, and there are some headwinds ahead in both the U.S. and China, in our view.”

The funds raised by selling a minority stake in Healthineers would provide investment cash for both in-house growth and acquisitions. Possible areas to be targeted could include molecular diagnostics, advanced therapies, and custom hospital services.

In the molecular diagnostics sector such research or acquisitions could be costly. For example, U.S. company, Cepheid, the top firm in that market, went for $4 billion including debt, or just over six times sales.

The idea of bringing Healthineers to market has been at the forefront of Siemens planning since at least November 2016.

"Health care is one of the most attractive businesses, if not the most attractive we have in the company," Joe Kaeser, president and CEO of Siemens AG, said when announcing the spinoff of Healthineers at that time, adding that "we want to focus it more."

The move had been in the works since 2014, when Siemens created the health care component as a "company within the company." This gave it the ability to be agile enough to adjust to the the massive transformations sweeping the health care market.

"The public listing is now the next step in further strengthening Siemens Healthineers in Siemens for the future," he stated, stressing that the move came during a period when the Healthineers already held "a leading position" and the company had boosted its market share.

In December, Siemens Healthineers was making a major move at its Walpole, Massachusetts, facility, pouring $300 million into it and adding 700 new jobs.

“The expansion of the Walpole facility fits into the strategic growth plans for the company and allows us to increase our manufacturing footprint in the United States, the largest health care market in the world,” said Bernd Montag, chief executive officer, Siemens Healthineers.“The laboratory instruments and reagents developed and manufactured at the Siemens Healthineers Walpole facility impact patients and health care providers across the globe.”

Walpole is the main manufacturing facility for assays that run on the ADVIA Centaur family of immunoassay instruments, and for consumables for the company's molecular and blood gas testing instruments, according to Siemens.

Plans also now call for the plant to produce the assays that will run on the immunoassay module of the Atellica Solution, which the company hopes will leapfrog the competition and become a market leader.

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