$8.3bn Widex/Sivantos deal wins EU regulatory approval

April 2019 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

April 2019 Issue

The $8.3bn merger between Danish hearing aid manufacturer Widex and German rival Sivantos has moved another step closer to completion after it was announced the deal won European approval in February. The merger will create the third-largest player in the hearing aid industry with a global market share of around 24 to 25 percent.

According to a statement from Widex, the European Commission (EC) concluded that the merger would raise no competition concerns. The EC was the final regulatory authority to rule on the deal, which had already been approved in all other relevant jurisdictions.

“Our goal at Widex has always been to develop the best possible hearing aids to improve the life of those with hearing needs,” said Jan Tøpholm, chairman of Widex. “The merger with Sivantos brings us one step closer to that goal by building a company with one of the strongest research and development resources in the business and the sales channels to ensure our innovative products reach as many people as possible.”

“The merger between Widex and Sivantos is a transformative combination and unique opportunity to drive innovation through one of the most dynamic R&D teams in the industry to benefit the more than 700 million people with hearing needs,” said Marcus Brennecke, global co-head of EQT Private Equity, which owns Sivantos.

EQT Partners bought Sivantos from Siemens in 2015 for more than €2bn. Once the Widex/Sivantos merger has completed, the newly merged company will be owned by EQT funds (EQT VI, EQT VII and EQT VIII), including co-investors, as well as the Tøpholm and Westermann families of Denmark. The Tøpholm and Westermann families, founders and owners of Widex, will be the largest individual shareholder in the combined entity, reflecting their long-term commitment to the company. The board of directors and management will have a balanced representation from both companies.

The newly merged company will be a global leader with a presence in more than 125 markets, combined revenues of more than €1.7bn and more than 10,000 employees worldwide. The company would be worth more than €7bn, including €3bn in debt. All Widex and Sivantos brands will continue to operate with separate sales forces and organisations following the combination, the companies noted in a statement. Now that the EC has given the merger the green light, the companies expect to close the transaction in the first quarter of 2019.

The press release announcing the deal in May 2018 claimed it was established with the “ambition to redefine the competitive landscape for hearing aids serving both existing users as well as improving the offering and access to the millions with hearing impairments”.

The merger was due to be finalised in November 2018, however on 30 October the parties announced they had withdrawn their application to have the EC approve the merger, despite remaining committed to the deal.

The merger is to being financed by funds provided by J.P. Morgan, Goldman Sachs and Deutsche Bank and is expected to replace existing financing arrangements. Latham & Watkins is acting as financing counsel. Widex is being advised by J.P. Morgan, Kromann Reumert and Deloitte. EQT and Sivantos are being advised by Freshfields Bruckhaus Deringer, Plesner, PricewaterhouseCoopers and AON. The Boston Consulting Group is providing additional commercial advice.

Once the deal has completed, the newly merged company will create one of the most innovative R&D teams in the industry, backed by financial and strategic capabilities as well as strong digital skills to become a global powerhouse for innovative hearing aids and hearing care solutions. Combined R&D resources include approximately 800 specialists in R&D centres located in Singapore, Erlangen, Germany and Lynge, Denmark. The company plans to dedicate more than €100m to annual R&D spending.

Richard Summerfield