Siemens is set to list its medical solutions unit, Siemens Healthineers, on the Deutsche Börse in Frankfurt. The listing is expected to be Germany’s biggest since Deutsche Telekom’s $13 billion IPO in 1996.
With sales up 3% to €14.2 billion this year, Healthineers is reportedly the second-largest of Siemens’ nine divisions by revenue, most of which is earned through selling medical equipment such as X-ray and magnetic resonance imaging technology. Its high margins of up to 18% stem from offering services that combine hardware and software, including consulting services, making it the company's most profitable unit.
Projected to take place in the first half of 2018, the IPO is likely to involve about a quarter of the unit’s shares and will likely be so large as to see the new company join the DAX 30 index. The listing is part of Siemens CEO Joe Kaeser’s Vision 2020 plan, launched in 2014, to focus on the group’s core industrial operations and spinning off its other divisions in a so-called “fleet of ships” business model. Siemens already merged its renewable energy unit with Spanish wind turbine maker Gamesa in April 2017 and is under the process of joining its rail division with French group Alstom, which will then list in Paris.
The move also marks a huge boost for Frankfurt as New York, London and Hong Kong have become the most popular exchanges for large listings. “Frankfurt is one of the world’s largest trading centers for securities, and its importance will continue to increase due to Brexit,” said Michael Sen, CEO of the Siemens Healthineers business.
The company had been considering listing in New York, as the price-earnings multiples of New York-listed healthcare companies tend to be much higher than for comparable healthcare firms listed in Europe, but Frankfurt got the nod over New York because the group wants to be seen as “truly global” rather than US-centric and because of its appeal to Asian investors. Although Healthineers’ biggest market is the US, its next two biggest countries in terms of revenue are China and Japan.
Finally, the decision was partially brought about in order to ease pressure from unions, who are concerned that a company listed in New York would sacrifice Germany’s vaunted policy of co-determination, in which union leaders sit on the company’s board and participate in major decisions. The group may need the support of the unions, at this time particularly. They were already angry about a proposed restructuring plan that involves nearly 7,000 job cuts in the loss-making power generating and wind divisions.
Jeanne Yizhen Yin