Siemens Healthineers IPO Valued at €31 Billion, Below Market Expectations

On March 4, VCBeat learned that Siemens of Germany had announced details regarding the spin-off and listing of its healthcare division, Healthineers, on the Frankfurt Stock Exchange. The company plans to sell up to 15% of the division’s shares, or a maximum of 150 million shares, priced at €26 to €31 per share, raising between €3.9 billion and €4.65 billion ($4.8 billion to $5.7 billion).

This implies a valuation of at most €31 billion ($38.2 billion), below the external expectation of €35 billion ($43.1 billion), but it will still rank among Germany’s largest IPOs in recent years. The new shares were offered from March 6 to 15, and the company listed on March 16.。

Siemens' healthcare division was renamed Siemens Healthineers in 2016. It has a global workforce of 45,000 employees. In the 2017 fiscal year (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).

Revenue is primarily derived from the Medical Imaging division, which accounts for nearly two-thirds of total revenue and holds a global leadership position. This division has achieved record-breaking revenue growth and enjoys high gross margins. Additionally, 11% of revenue comes from the Advanced Therapies division, which specializes in minimally invasive surgery and demonstrates equally strong profitability. However, the performance of these two major profit-generating divisions has been dragged down by the Medical Diagnostics division, resulting in a mere 3.8% revenue growth rate 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 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 sector long dominated by Roche and Abbott Laboratories. Siemens Healthineers has high expectations for Atellica and is simultaneously working to restructure its medical diagnostics division, aiming to raise revenue growth to 4%–6%.

Siemens’ current plan to launch an IPO for Healthineers and sell off its stake is not a sign of waning confidence in its healthcare business or a desperate move to liquidate assets for cash; quite the contrary, it aims to strengthen its M&A capabilities through the public listing, thereby facilitating further expansion in the future.