Sonova Holding AG, Stäfa, Switzerland, reports that it has entered into a share purchase agreement with the shareholders of Advanced Bionics Corp, Valencia, Calif, expanding its position as a provider of hearing care solutions, says a statement from Sonova.
Advanced Bionics (AB), which develops and manufactures cochlear implant systems, says the acquisition represents a strategic expansion into the area of cochlear implants for the Sonova Group. The purchase consideration of $489 million will be fully paid in cash, and pending regulatory and shareholder approval, the transaction is expected to close within the 3 months, says Sonova.
Sonova shared its appraisal of the transaction’s highlights:
• Sonova becomes the first global hearing care company with a strong worldwide presence in hearing instruments and cochlear implant systems
• Sonova enters into the high-growth market of cochlear implant systems with expected market growth rates of 10% to 15% per annum
• Sonova’s commitment to innovation will boost Advanced Bionics’ position as an innovation leader in the cochlear implant industry
• The Sonova Group targets to improve the performance of Advanced Bionics, doubling sales and increasing EBITA margin to 20% or beyond within the coming 3 to 5 years
• With all cash consideration of $489 million plus transaction costs of CHF 10 million totaling CHF 510 million at current exchange rates, the transaction is expected to be accretive to earnings per share (EPS) before transaction-related amortization in the second full year after closing. The company expects to pay down its debt based on its continuous strong free cash flow generation.
The acquisition represents a strategic expansion into the area of cochlear implants for the Sonova Group, leveraging the its leading position as a global provider of hearing systems, according to the statement issued by the company.
“With this transaction, Sonova adds a new source of sustainable business growth and enhances its position as the leading provider of hearing health care solutions,” said Valentin Chapero, CEO, Sonova Group, in the statement. “With all its brands, Sonova will offer the most comprehensive and innovative product and service portfolio covering any customer need for most types of hearing problems.”
Jeffrey Greiner, CEO of AB, said in a statement released by AB that "Sonova was attracted to our company for our advanced technology, commitment to our patients, and our potential for expansion."
As with Phonak, a global provider of micro hearing systems, Advanced Bionics will remain an independent division within the Sonova Group, says AB.
Sonova’s statement says that that Advanced Bionics "will share all of the integral elements that have been driving the success of Sonova over the last decade: global sales coverage, outstanding service orientation, world-class supply chain, a high innovation rate, and a strong implementation culture."
Sonvoa says further that Advanced Bionics is one of the global leaders in the development, manufacturing, and distribution of cochlear implant systems with revenues of $117 million in 2008. Founded in 1993 and backed by innovator Al Mann, the company is present in more than 30 countries and has become the global number two with an estimated share of approximately 18% of the cochlear implant market, says the statement.
Cochlear implants are surgically implanted devices that restore hearing for people with profound hearing loss. A cochlear implant system consists of an external processor that captures and converts sound into detailed digital information, a magnetic headpiece that sends the signal to the implant, and an electrode, implanted directly in the cochlea, that delivers electrical signals to the hearing nerve. The hearing nerve sends impulses to the brain, where they are interpreted as sound.
The transaction will be financed with a combination of existing cash of the Sonova Group amounting to CHF 40 million and an underwritten senior credit facility of CHF 470 million, says the statement. The senior credit facility will be made in two tranches, a CHF 240 million amortizing loan with a term of 3 years and a CHF 230 million term facility with a term of 5 years. Credit Suisse, UBS, and Zürcher Kantonalbank have underwritten the syndicated credit facility as mandated lead arrangers. The acquisition is subject to regulatory clearances.
Sonova also reports that it is terminating the share buyback program for up to 10% of its share capital, which started on September 20, 2007 with immediate effect. A total of 2,113,500 registered shares with a nominal value of CHF 0.05 have been repurchased at an average price paid per share of CHF 94.98, corresponding to 3.15% of share capital when the buyback program was launched, says the company. The value of the shares repurchased was CHF 200.7 million. The repurchase was carried out via a second trading line on the SIX Swiss Exchange AG set up especially for the share buyback. The general shareholders’ meeting of 2009 agreed a capital reduction via the cancellation of the 718,500 registered shares, which had not yet been cancelled, says the company.
Sonova shareholders are expected to benefit from value creation through a combination of accelerated growth and financial improvements at Advanced Bionics, says the statement. Sonova aims to significantly increase Advanced Bionics’ market share in this high-growth market.
Advanced Bionics will benefit from Sonova’s high-performance hard- and software platforms and the Group’s existing technologies that are complementary to the cochlear implant industry, says Sonova. This transaction will enable innovation by applying state-of-the-art acoustics and mechanical engineering know-how, implementing advanced audiological algorithms, and simplifying the fitting process, Sonova says.
Sonova reports that Advanced Bionics will be supported by Sonova’s global sales organization, achieving a significant enhancement of its international distribution and service capabilities. Patients, customers, and partners of Advanced Bionics will benefit from the improved product features and the expanded global presence, and from the stability and continuous innovation that Advanced Bionics will enjoy as part of the Sonova family, says Sonova.
Together with Sonova’s operational management capabilities, there is significant potential to improve the financial performance of Advanced Bionics and to assure its long-term success, says Sonova.
“Over the last months, a significant number of people from both companies have been working with each other. We all felt that this is the ideal combination and that together we will be able to achieve great things—especially for the benefit of hard-of-hearing people.” Chapero said. “Sonova’s management is looking forward to working closely with the team at Advanced Bionics to unlock the company’s significant potential.”