KKR Working with Hellman on Siemens Hearing Aid Bid

LONDON/FRANKFURT (Reuters) – Switzerland’s Synthes Inc (SYST.VX) and Australia’s Cochlear Ltd (COH.AX) have emerged as suitors for Siemens AG’s (SIEGn.DE) hearing aid unit ahead of binding bids due in late February, sources familiar with the matter said.

The two companies are joining five private equity firms in pursuit of the unit, which sells one in four of the world’s hearing aids.

The keen interest comes as Siemens, the German industrial conglomerate, sharpens its focus on core areas and as private equity firms enjoy improving access to debt and regain the appetite to do deals.

Cochlear is working with private equity firms Hellman & Friedman and Kohlberg Kravis Roberts & Co. on a joint bid, the sources said. A trio of other buyout firms — Bain Capital, Cinven Ltd [CINV.UL], and Permira [PERM.UL] — are also each working on separate bids for the unit, the sources said.

Siemens hopes the unit, which competes with Switzerland’s Sonova Holding AG (SOON.VX) and Denmark’s William Demant Holding A/S (WDH.CO), would fetch more than 2 billion euros ($2.83 billion), people familiar with the matter said earlier this month.

Cochlear did not immediately respond to a request for comment outside of Australian business hours. KKR could not immediately be reached for comment. Siemens and the other private equity firms all declined to comment.

BROKEN BONES

Siemens does not disclose detailed information on the unit, but Deutsche Bank analysts estimate it has about 25 percent of global hearing aid volumes, sales of about 700 to 900 million euros and a double-digit operating margin.

In a note published this week, Deutsche said the unit focuses on low- and mid-range devices, with products that lag those of its main rivals by 3-5 years — meaning any buyer would need to make significant investments in research and development and distribution.

The unit was projected to make earnings before interest, taxes, depreciation and amortization (EBITDA) of some 170 million euros in 2010, sources said earlier this month.

Any takeover by Synthes would be a move into new territory for the Swiss firm, whose range of medical devices covers areas such as nails, screws and plates to fix broken bones.

But a purchase would be in line with its aim of targeting high-growth markets driven by aging populations.

Australia’s Cochlear, working alongside the two U.S. buyout firms, dominates the market for bone-anchored hearing systems, which unlike conventional hearing aids are implanted surgically in the bone behind the ear.

GIGASET

Siemens is also seeking a new majority owner for Gigaset, its former telephone unit now owned 80 percent by Arques Industries AG (AQUG.DE), and has already sounded out possible financial investors, sources familiar with the situation told Reuters on Friday. [ID:nWEB6343]

Siemens wants to present a proposal for Gigaset, and a shortlist of potential buyers for the hearing aid business, to a Feb. 22 board meeting, those sources said. ($1=.7078 Euro)

(Reporting by Quentin Webb, Simon Meads and Zaida Espana in London, Philipp Halstrick in Frankfurt and Jens Hack in Munich; editing by Karen Foster and Gerald E. McCormick)