Cochlear Gains on Speculation of Acquisition

Submitted by Jim Thesiger on 26 January, 2010 - 07:07

Cochlear (COH), an Australia based manufacturer and supplier of implantable hearing solutions have seen its shares to go up significantly mainly due to the speculation that the company is going for a $2.8 billion worth of bid for the hearing aid division of Siemens. Cochlear gained close to 2 percent to its stock price and was closed at $1.18 on Monday. It is to be mentioned that the Australian manufacturer of hearing solutions was one of the bidders for the hearing aid division of Siemens. According to a report, the offer presented by Cochlear has been taken under consideration as a joint venture with Hellman & Friedman, which is a private equity firm and Kohlberg Kravis Roberts.

The speculation received another boost after a Cochlear spokesman refused to make any comments regarding the issue on Monday despite it was revealed that Chris Roberts, the chief executive of the company have stated previously that Cochlear was not engaged in the sale process. The situation is likely to be clarified when trading begins tomorrow. However, the market analysts were in doubt about the possibility of an acquisition of the hearing aid division of Siemens with one analyst stating that with a balance sheet strong enough to go for the purchase, this would effectively appear as a backwards step for Cochlear. According to that analyst, Cochlear is already in a strong position in the industry and therefore it would not be logical for the company to purchase old technology. The Australia based company is currently dominating the market for the bone-anchored hearing systems. The uniqueness of this particular system is it has to be surgically implanted in the bone at the back the ear which is not the case for the conventional hearing aids.

According to the estimations of the analysts of Deutsche Bank, Siemens accounts for about one-fourth of the world wide sales of hearing aids, something that worth around $1.09 to $1.4 billion and the earnings before interest, taxes, depreciation and amortization is projected to be around E170 million for this year. Deutsche also added that the hearing aids manufactured by Siemens was lagging by as much as five years in comparison its competitors as far as the technology is taken under consideration and any buyer who will go for the unit will require to invest in sectors like research and development and distribution.