Siemens AG will press ahead with an initial public offering of its health-care unit, as Chief Executive Officer Joe Kaeser unloads another key business at Europe’s largest engineering company.
The IPO of “a meaningful minority share” in Siemens Healthineers, as the company is known, will be completed in the first half of the year on the Frankfurt Stock Exchange, subject to market conditions, the Munich-based company said in a statement.
While Siemens didn’t give details on the size of the sale, it’s likely to be one of the biggest equity offerings ever in Germany. Siemens aims to raise as much as 10 billion euros (US$12.4 billion) by selling up to 25% of the business, valuing Healthineers at as much as 40 billion euros, people familiar with the matter said in January. The so-called intention to float announced Monday is typically followed by a formal IPO prospectus with details of the sale within the following month.
“Siemens Healthineers is a premium asset and we have worked hard to now list such an exciting franchise,” said Michael Sen, chairman of the health unit’s supervisory board and member of the Siemens management board. “We expect the business to capitalize on its strengths even more effectively after the listing.”
The IPO is part of a broad overhaul by Kaeser, who merged Siemens’s wind power unit with Spanish competitor Gamesa SA in 2017 and is combining the company’s train business with that of Alstom SA. The new holding-company structure, giving business units more independence, has been described by the CEO as shifting Siemens from being an aircraft carrier to a nimble fleet of ships.
Siemens advanced 0.9% to 112.20 euros at 9:28 a.m. in Frankfurt. The shares are down 3.4% this year, giving the company a market value of 95.4 billion euros.
Not all the transactions have gone smoothly. Siemens Gamesa Renewable Energy issued two profit warnings after its merger and announced it would cut about a quarter of its workforce in November. A prolonged slump in demand for wind turbines and changes to energy pricing in India hit wind companies across the sector last year. According to people familiar with the matter, Siemens also plans to sell the Flender GmbH mechanical drives operation.
Siemens is moving ahead with the Healthineers sale after a stumble in global equity markets beginning in late January led some companies to cancel planned IPOs. Germany’s benchmark DAX Index slumped as much as 11% from its January peak, though has since recovered some of the losses.
The company first said in November 2016 that it planned an IPO of a minority stake in the unit, which makes imaging and diagnostic equipment used in hospitals, medical practices and labs. Competitors include General Electric Co. and Royal Philips NV. Healthineers will remain core to the parent company and will be consolidated in its financial accounts, Siemens said Monday.
The health business had revenue of 13.8 billion euros in fiscal 2017 and adjusted profit of 2.5 billion euros, equal to a profit margin of about 18%. Siemens Healthineers will aim to pay a dividend of 50% to 60% of net income, the company said.
Deutsche Bank AG, Goldman Sachs Group Inc. and JPMorgan Chase & Co. are arranging the sale, with BNP Paribas, BofA Merrill Lynch, Citigroup Inc. and UBS Investment Bank as joint bookrunners.
By Oliver Sachgau