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MarketScreener Homepage  >  Equities  >  Xetra  >  Siemens Healthineers AG    SHL   DE000SHL1006

SIEMENS HEALTHINEERS AG

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Siemens Healthineers expands into cancer care with $16.4 bln deal for Varian

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08/02/2020 | 05:02am EDT
A staffer works on a magnetic resonance imaging machine at a production line of Siemens Healthineers in Shenzhen

* Agreed deal seeks to create cancer treatment leader

* Siemens to provide bridge financing for subsidiary Healthineers

* Healthineers plans to raise half of deal costs via rights issue

* Medtech group reports weaker Q3 results, but maintains guidance

MUNICH/BERLIN, Aug 2 (Reuters) - German health group Siemens Healthineers said on Sunday it was buying Varian Medical Systems Inc of the United States for $16.4 billion in a deal that seeks to create the global leader in cancer care solutions.

The deal is the first major growth move by Healthineers since it was spun off and floated in 2018 by Siemens, which is undertaking a broader shakeup of its conglomerate structure to create room for its business units to do their own deals.

Siemens, which will retain control over Healthineers, will provide bridge financing for the deal that will be partly refinanced by a rights issue by the medical technology unit later this year.

Under the agreed transaction, Healthineers will acquire all shares in Varian for $177.50 each in cash, representing a 24% premium to the U.S. company's closing price on Friday and 42% above its 30-day weighted average.

"With this takeover, we are significantly strengthening our position - in addition to cardiology and neurology - in the field of oncology," Chief Financial Officer Jochen Schmitz told Reuters in an interview.

CEO Bernd Montag rejected suggestions that Healthineers had overpaid for Varian. "This is an icon in our industry," he told reporters on a conference call. "If you put it into perspective we achieved a sensible price."

Through the deal to buy Varian, Healthineers acquires the leader in radiation therapy with a market share of over 50%.

Healthineers highlighted a long-term rise in the incidence of cancer - from 14 million cases worldwide in 2010 to a forecast 25 million in 2030.

That translates into an addressable market of $20 billion that is forecast to grow at an annual rate of between 6% and 10%, the company said in a presentation on the deal.

The transaction, first reported by Bloomberg, is subject to approval by Varian shareholders and regulators. It is expected to close in the first half of 2021 and be accretive to Siemens Healthineers' adjusted basic earnings per share within 12 months of that.

"With Siemens Healthineers, we will transform care for a greater number of patients worldwide, as well as broaden opportunities for our employees as part of a larger and more global organization," Varian President and Chief Executive Officer Dow Wilson said.

BALANCE SHEET SUPPORT

Conglomerate Siemens is effectively putting its balance sheet to work to fund the deal, providing a bridging loan of 15.2 billion euros ($17.9 billion) to Healthineers.

The medical technology unit aims to replace 50% of that through a rights issue this year, subject to market conditions.

Siemens said in a statement that it expressly welcomed the deal and would raise the money for the bridging loan by issuing bonds. It will not participate in the rights issue, meaning its stake in Healthineers will be diluted to about 72% from 85%.

Siemens aims to maintain its A+ debt ratings, which put it firmly in investment grade.

Healthineers also pre-released fiscal third quarter results instead of on Monday due to the acquisition announcement. They showed its revenue declined 6.9% year-on-year on a comparable basis to 3.3 billion euros due to the impact of the coronavirus pandemic.

Its adjusted operating margin was 13.9%, down 1.2 percentage points from the same period a year earlier, while adjusted basic earnings per share fell 21% to 30 euro cents.

The company said it expects revenue to be flat in fiscal 2020 while adjusted basic earnings per share are seen at between 1.54 and 1.62 euros, compared to 1.70 euros last year, assuming the business environment does not deteriorate further. ($1 = 0.8493 euros) (Additional reporting by Joern Poltz Editing by Gareth Jones, Susan Fenton, Alexandra Hudson)

Stocks mentioned in the article
ChangeLast1st jan.
SIEMENS AG -1.04% 116.22 Delayed Quote.-0.27%
SIEMENS HEALTHINEERS AG -1.11% 40.92 Delayed Quote.-4.44%
VARIAN MEDICAL SYSTEMS, INC. -0.06% 173.15 Delayed Quote.21.93%
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Financials
Sales 2020 14 705 M 17 411 M 17 411 M
Net income 2020 1 394 M 1 650 M 1 650 M
Net Debt 2020 4 232 M 5 011 M 5 011 M
P/E ratio 2020 28,8x
Yield 2020 1,92%
Capitalization 40 830 M 48 308 M 48 343 M
EV / Sales 2020 3,06x
EV / Sales 2021 2,82x
Nbr of Employees 54 100
Free-Float 14,9%
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Mean consensus HOLD
Number of Analysts 18
Average target price 43,31 €
Last Close Price 40,92 €
Spread / Highest target 27,1%
Spread / Average Target 5,84%
Spread / Lowest Target -9,58%
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Managers
NameTitle
Bernhard Montag Chief Executive Officer
Heinrich Kolem President-Advanced Therapies
Ralf Peter Thomas Chairman-Supervisory Board
Jochen Schmitz Chief Financial Officer
Thorsten Opderbeck Head-Technology, Trade & Regional Media
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