€40 Billion Siemens Healthineers Files for Frankfurt IPO, Marking Germany's Largest Listing in Two Decades

VCBeat (WeChat ID: vcbeat) has learned, Siemens' Supervisory Board recently announced that,Select Frankfurt (not New York, as previously rumored) as the listing venue for its subsidiary, Siemens Healthineers, and is expected to be listed in the first half of 2018. As part of this IPO, Siemens expects to sell up to 25% of its equity stake.

According to Dealogic data,Siemens Healthineers is valued at €40 billion, and this IPO will become the largest listing in Germany since Deutsche Telekom’s $13 billion IPO in 1996.。

Siemens Healthineers’ decision to list in Frankfurt marks a major victory for the German exchange. Although the Frankfurt Stock Exchange is one of the world’s four largest securities trading centers, it often struggles to compete with New York, London, and Tokyo in the race to secure large-scale initial public offerings.

Previously, New York was considered the likely location for the IPO, partly because healthcare companies listed in the United States often command higher valuation multiples than those listed in Europe. However, at Siemens’ annual press conference held this month, Siemens Chief Financial Officer Ralf P. Thomas stated,From 2010 to around 2015, the valuation advantage of the United States has disappeared.He stated that, from an economic perspective, there is no longer a compelling rationale for listing in New York.

The decision by the United Kingdom to withdraw from the European Union contributed, to some extent, to Siemens Healthineers’ exclusion of London as a potential listing venue. Meanwhile, in the wake of Brexit, the Frankfurt Stock Exchange has emerged as the core of the eurozone’s securities market.

Michael Sen, a member of the Board of Management of Siemens Healthineers, stated: “Frankfurt is one of the largest securities trading centers in the world, and its importance will continue to rise due to Brexit. As a highly liquid trading venue, Frankfurt attracts investors from around the globe.”

The German DAX 30 Index Has Nearly Doubled in Value Over the Past Five Years

According to Google Finance data, the German DAX 30 index has nearly doubled over the past five years, and the broader market has continued to rise since 2017, following a slight easing of the European debt crisis.

Frankfurt is becoming increasingly attractive to investors from around the world, especially Asian investors, andChina and Japan are Siemens Healthineers' two largest revenue-generating countries outside the United States.Therefore, Siemens aims to be regarded as a “truly global” enterprise, and choosing to list in Frankfurt has undoubtedly become its best option.

Choosing to list on the German domestic market offers another hidden benefit. Earlier reports indicated that Siemens plans to cut nearly 7,000 jobs in its core power division, a move management hopes will help ease tensions with German labor unions.

With its IPO imminent, Siemens announced on November 9 the appointment of Jochen Schmitz as the new Chief Financial Officer of Siemens Healthineers, who will report directly to Ralf P. Thomas, CFO of Siemens AG. His predecessor, Thomas Rathmann, will depart from Siemens Healthineers by mutual agreement. This move is part of the preparations for Siemens Healthineers’ initial public offering, underscoring the strategic importance of the CFO role to Siemens.

Jochen Schmitz, the newly appointed Chief Financial Officer, joined Siemens in 2004 and was appointed as the Performance Manager for Siemens’ medical business. He subsequently served as CFO at multiple Siemens Healthcare subsidiaries in Germany and the United States. From 2009 to 2011, he served as CFO of the Imaging & Diagnostics sector. Since 2011, Jochen Schmitz has been serving as the Head of Accounting, Reporting, and Controls for the Siemens Group. In addition, he is responsible for preparing financial reports for the capital markets.

Siemens Group CFO Ralf P. Thomas emphasized, “Jochen Schmitz’s extensive international experience across nearly all areas of the medical technology business over many years makes him ideally suited for this role.”

In addition to appointing a new CFO, Siemens Group CEO Joe Kaeser is also implementing reforms at Siemens, with the listing of Siemens Healthineers marking his most significant move since taking office.

According to Siemens' 2017 annual report, the company's total revenue for the fiscal year 2017 was €83.049 billion, with a net profit of €6.179 billion.Among them, Siemens Healthineers generated revenue of €13.789 billion (accounting for 16.6%) and net profit of €2.49 billion (accounting for 40.3%), making it the highest-revenue division among Siemens’ nine business segments.

Analysts value Siemens at approximately €40 billion. While Siemens Healthineers is renowned for selling medical equipment to hospitals, its high profit margins stem from providing integrated software and hardware services, which include consulting services.

Siemens has merged its renewable energy division with the Spanish wind turbine manufacturer Gamesa, listing the combined entity on the Madrid stock exchange. Siemens is currently merging its rail division with France’s Alstom, and upon completion, the merged company will be listed in Paris.

As Siemens Healthineers’ IPO approaches, Siemens expects to float 15%–25% of its equity in Siemens Healthineers on the secondary market, implying the sale of shares worth €6–10 billion.