Siemens, Europe's largest industrial conglomerate, plans to list its €40bn medical solutions division in Frankfurt, setting the stage for Germany's largest initial public offering in more than two decades.
The Munich-based group on Wednesday chose Frankfurt over New York for the listing of Healthineers, an imaging and diagnostics business. The supervisory board’s decision to list there – probably in the first half of 2018 – is a coup for Deutsche Börse, which has often been overshadowed in the race for large listings by New York, London and Hong Kong.
As part of the IPO, Siemens is expected to sell a minority stake of up to 25 per cent. That would make it Germany’s biggest listing since Deutsche Telekom’s $13bn IPO in 1996, according to Dealogic.
The listing will be the biggest move yet for chief executive Joe Kaeser as he revamps the group's sprawling structure. Under Mr Kaeser's Vision 2020 plan, launched in 2014, Siemens is focusing on core industrial operations and spinning off its other divisions in what he calls a "fleet of ships" business model.
In the last quarter Healthineers was the largest of Siemens’ nine divisions by revenue, with sales of €3.7bn. Its 19 per cent margins also made it the most profitable. Analysts value it at around €40bn. The division is known for selling medical machines to hospitals but its high margins stem from offering services that combine hardware and software, including consulting services.
Siemens has already merged its renewable energy unit with Spanish wind turbine maker Gamesa and spun the combination off in Madrid. It is currently in the process of joining its rail division with France's Alstom, which will then list in Paris.
As Siemens scouted locations for the Healthineers float, it ruled London out in part because of Britain’s decision to leave the EU, three people familiar with the company’s thinking said. Siemens declined to comment on whether London was ever in the running.
Michael Sen, the board member responsible for Healthineers, said: "Frankfurt is one of the world's largest trading centres for securities, and its importance will continue to increase due to Brexit. As a highly liquid trading venue, Frankfurt is attractive for investors from around the world."
People familar with the decision said Frankfurt was also favoured over New York because of its appeal to Asian investors and because the group also wanted to keep German unions happy. Management is already engaged in a public battle over nearly 7,000 looming job cuts in its core power unit.
Another factor that hurt the US was that New York-listed companies in healthcare tend to be US-centric, the people said. Although Healthineers’ biggest market is the US, its next two biggest countries for revenue are China and Japan, and Siemens wants the group to be seen as “truly global”, one person said.
Analysts had speculated several months ago that New York would be the more likely location for the IPO, in part because US-listed companies in the healthcare area tend to trade at higher multiples than in Europe. At Siemens' annual press conference this month, however, finance chief Ralf Thomas said the valuation bias favouring the US had diminished from 10 to 15 years ago. From an economic perspective, he said, there was no longer a clear reason to list in New York.
Mr Kaeser told the FT then that "old-fashioned conglomerates" are "definitely not going to survive" as they digitalise their operations with software and adapt to the growth of renewable energy sources. To reporters he had also boasted that Siemens' competitors had been "less active in shaping their strategic transformation" – a slightly veiled dig to arch-rival General Electric.
Siemens has appointed Goldman Sachs, Deutsche Bank and JPMorgan as lead underwriters of the deal.
– Copyright The Financial Times Limited 2017
