Siemens Healthineers Successfully Lists on Frankfurt Stock Exchange, Raising $5.2 Billion in One of Germany's Largest IPOs

Mar 16, 2018 20:02 CST Updated 20:02

According to VCBeat, Siemens Healthineers successfully listed on the Frankfurt Stock Exchange today (March 16)! The company raised €4.2 billion ($5.2 billion) in its IPO, with an issue price of €28 per share. The stock price rose nearly 4% at the opening, currently trading at €29.10 ($35.86) per share.

In 2016, Siemens' healthcare division was renamed Siemens Healthineers. The company has a global workforce of 45,000 employees. In fiscal year 2017 (October 2016 to September 2017), its total revenue reached €13.8 billion, with profits amounting to €2.49 billion (accounting for 40% of Siemens' total net profit).

Imaging services are its largest profit driver.

According to Siemens Healthineers’ prospectus, the Imaging business is currently the largest profit driver for Siemens Healthineers.Revenue is primarily derived from the Medical Imaging segment, which holds a global leadership position and accounts for nearly two-thirds of total revenue. This segment has achieved record-breaking revenue growth and enjoys high gross margins. Additionally, 11% of revenue comes from the Advanced Therapies segment, which demonstrates equally robust profitability and specializes in minimally invasive surgery.

However, the performance of its two major profit-generating divisions was dragged down by the Medical Diagnostics division, resulting in a revenue growth rate of only 3.8% for Siemens Healthineers over the past three years. Compared to the global economic growth rate of 2.7% in 2017, this performance can be described as lackluster.

Siemens had previously sought to bolster the performance of its healthcare business through alliances and acquisitions. In October 2016, Healthineers announced a partnership with IBM, leveraging IBM’s Watson artificial intelligence supercomputer to enhance healthcare-related services. In 2017, it acquired Medicalis, a population health management company, and also launched Atellica, its brand for laboratory equipment, challenging a domain long dominated by Roche and Abbott Laboratories. Siemens Healthineers has high hopes for Atellica and is simultaneously working to restructure its medical diagnostics division, aiming to raise revenue growth to 4%–6%.

This is one of Germany’s largest IPOs, with a future focus on acquisitions and investments.

The funds raised in this offering will be used for future acquisitions and investments, thereby enhancing the standalone value of Siemens Healthineers. In this IPO, Siemens Healthineers sold a 15% stake, with its parent company, Siemens, stating that it plans to remain a long-term controlling shareholder.

Siemens Healthineers’ IPO was one of the largest in Germany in nearly two decades and one of the biggest in Europe this year.

Due to technical issues at the Frankfurt Xetra Stock Exchange, Siemens Healthineers’ listing was delayed by approximately one hour, occurring at around 10:03 a.m. (Frankfurt time) instead of the scheduled 9:00 a.m.

Notably, this IPO represents the most significant move by Siemens CEO Joe Kaeser to restructure the company’s corporate architecture. According to Siemens’ vision plan released in 2014, the company would focus on its core industrial businesses, divest other operations, and adopt a “fleet” business model. In the third quarter of 2017, Siemens Healthineers recorded sales of €3.7 billion, making it Siemens’ most profitable division. It also boasted the highest profit margin, reaching 19%.

Siemens Healthineers is renowned for selling medical equipment to hospitals, but a significant portion of its profits comes from integrated hardware and software services, including consulting services.

Siemens Healthineers’ largest market is the United States, followed by China and Japan as its second- and third-largest markets, respectively.According to the Financial Times, Siemens wants to be seen as a “truly global” company.

Following its recent listing, Siemens Healthineers will engage in direct competition with GE and Philips in the medical equipment sector. Currently, Siemens Healthineers has a market capitalization of approximately €26–31 billion, falling short of the initially expected €40 billion. Analysts attribute this discrepancy primarily to market volatility and uncertainties surrounding the company’s new product, Atellica.