10-04-2006
Stäfa, Switzerland—On October 2, GN Store Nord and Phonak AG announced a share purchase agreement in which Phonak would buy the ReSound Group for $2.65 billion (15.5 billion DKK). The combined group—which would include Phonak, Unitron, GN ReSound, Beltone, Interton, and GN Otometrics—would have reported pro forma revenues of more than $1.2 billion based on 2005-2006 results. The transaction is expected to be completed in the first half of 2007.
The announcement ends months of speculation about a transaction involving GN after that company’s board of directors announced on July 5 that it would explore options involving a sale, merger, or additional purchases of smaller companies (see August HR News, p 8). The board appointed JP Morgan to review its business units to see if it would be better to sell of its group of companies or if they “could create similar value to GN’s shareholders by continuing its current strategy based mainly on organic growth supported by minor acquisitions and investments in distribution and retail.”
GN President and CEO Jørn Kildegaard and company CEO Jesper Mailind will both be retiring from the executive management team. Toon Bouten has been appointed the new president and CEO, along with Executive Vice President and CFO Jens Due Olsen, will comprise GN’s executive management.
According to Phonak, the key benefits of the purchase include the creation of a large, global hearing instrument company that has a broadly diversified customer base; a portfolio of hearing instrument brands enjoying strong, long-lasting customer relationships worldwide; a commitment to leadership in innovation with one of the broadest and deepest R&D capabilities in the industry, and new growth opportunities. The company also expects that dispensing professionals and end-users will benefit from a greater array of marketing and branding capabilities.
“The combined Group will become the global hearing health care powerhouse with the most comprehensive portfolio of highly valued hearing brands,” says Phonak Group CEO Valentin Chapero. “We will create a world-class team that will deliver the best of both companies to customers around the world. They will benefit from improvements at all levels while keeping the established relationships and brands they value so much. Along with our marketing and branding capabilities, we anticipate becoming the most attractive supplier to [dispensing professionals] and end-users alike. Being a global hearing health care powerhouse will help us invest in raising public awareness on the importance of the sense of hearing.”
According to HR estimates, Phonak and GN ReSound are the third and fourth largest hearing aid groups in the world with an estimated market share of 17% and 14%, respectively, following closely behind William Demant Holding (18%) and Siemens Hearing Instruments Group (25%).
The ReSound Group, based in Copenhagen, has a network of subsidiaries and distibutors in 60 countries, including GN ReSound, Interton, and GN Otometrics in the United States. It has 3,400 employees and annual sales of $560 million for the year ended March 31, 2006. The hearing instruments division makes up 90% of the Group’s sales.
GN ReSound has reportedly doubled its US sales during the last seven years, the period following ReSound Corp’s purchase by and merger with GN Danavox in 1999. The company positioned itself on the forefront of the open-fit mini-BTE trend with the 2003 introduction of ReSoundAIR, arguably the first commercially successful open-fit hearing aid of the new century. Although industry data suggests the company’s sales have declined during the last two years, sources from within GN ReSound report that it has rebounded in recent months as its Metrix, Pixel, and Plus5 mini-BTEs have experienced strong sales. This month, the company is introducing its latest premium hearing instrument, a rechargeable next-generation open-fit hearing aid called Pulse.
The Phonak Group distributes its products in 70 countries and, like GN ReSound, also has 3,400 employees worldwide. The company has experienced rapid growth in the last year, particularly within the US, fueled by the popularity of its Savia line of products. In addition to Phonak, the Group is also composed of Unitron, which launched its new Element hearing instrument at the end of last month, and Phonak Communication Systems, which markets MyLink and other special communication devices.
GN has developed and manufactured products for both the hearing health care market (GN ReSound, Interton, Beltone, and GN Otometrics) and the headset/telecommunications markets (GN Netcom and Jabra). Although the company has experienced considerable success in the hearing industry, it says the hearing aid group has not attained the same global leadership position achieved with its headsets, and “the need for critical mass in the [hearing] industry is constantly intensifying because the demand for more frequent and faster product launches in all price categories is constantly increasing, necessitating ever-greater investments in development, marketing, and sales,” according to a company statement.
“We have had a lot of contact with the ReSound Group over the last few months, and there is no doubt that they have very smart people, excellent technology, and bright ideas,” says Phonak’s Chapero. “This situation reminds me very much of the time when I started at Phonak four years ago. I am looking forward to working closely with the ReSound Group’s management to unlock the company’s potential.”
