Siemens AG has announced that it will spin off its hearing aid division as a public company, the result of a major company realignment that will pare the industry giant’s number of  core business divisions from 16 to 9. In line with this, its healthcare division will be managed as a separate business unit under the Siemens umbrella, and the hearing aid division will be spun off in an initial public offering.

In a press announcement, Siemens AG said it is preparing to publicly list its audiology activities in order to give the business an opportunity to better leverage its potential outside the company. “Step by step, Siemens’ hearing aid activities have succeeded in capturing a strong market position in recent years,” states the press release. “Experts predict that by 2020 the market for hearing aids will have grown by an average of 4% per year.”

In its May 7 financial presentation, it said that Siemens Audiology business can better realize its full industry potential outside of Siemens, because it has a distinct customer market in an area “far from Siemens core: Implants, retail, [and] consumer electronics.” Siemens said an independently listed company would better build on strengths of the business, focus management attention, and raise capital dedicated to building the business. Its audiology business is unique in Siemens for both its technology and its consumer-oriented market access, which limits synergy potentials with other Siemens businesses. Additionally, anticipated technological developments at Siemens Audiology differ greatly from those of the company and its healthcare activities. This applies particularly to growth fields like implants and the link to consumer electronics, says Siemens. The company in its financial presentation cited that the timing is right for the spin-off, with what it describes as a market with “secular growth [and] good margins,” a receptive stock market, and a leading global pure-play hearing aids player in a competitive market.

Although still a formidable force in the hearing industry, the Siemens Audiology group (which includes Rexton) has lost market share during the last decade. At one time, analysts estimated that it had a worldwide market share of more than 25%. However, now that number is estimated at about 17%, falling behind rival groups Sonova (Phonak and Unitron), William Demant Holding (Oticon, Bernafon, and Sonic), and possibly GN (ReSound, Beltone, and Interton). In the United States, the group has also been a relatively quiet player in the forward consolidation movement in which hearing aid manufacturers have bought up larger retail outlets—although Siemens did purchase HearUSA in 2011 after that company filed for bankruptcy.

Several times in the past 5 years there have been rumors from credible sources about Siemens AG putting its hearing aid division on the block.  Notably, in January 2010, the company offered the division for sale and then backed off selling it when the nearest bidder, a private equity firm, was a half-billion euros short of Siemens’ 2 billion euro asking price, according to published reports.

Siemens Hearing Instruments is one of the oldest and most respected hearing aid manufacturers in the world, beginning its involvement in the industry more than 100 years ago. In 1913, the company  brought to market what is thought to be the first industrially produced hearing aid, the Esha Phonophor, and the company has has many other important “industry firsts.” In recent years, it was first to introduce hearing aids utilizing radio technology to synchronize operation between the left and right ears, and in 2012 Siemens was awarded the German Future Prize by the Federal President of Germany for developing a binaural hearing system that enables hearing aids in both ears to communicate.

Siemens Audiology has more than 4,000 employees worldwide. Key locations include its headquarters in Erlangen, Germany, as well as major facilities in Piscataway, NJ, Kanagawa (Greater Tokyo), Crawley, UK, and Saint Denis (Greater Paris).