Hearing aid consolidation 'opens' after appeal

Germany’s supreme court has struck down a decision blocking the sale of GN Store Nord’s hearing aid division, the Danish company said, a step that removes a major roadblock to consolidation in the sector. But the company said it did not plan to revive the sale of its ReSound division.

GN had lodged an appeal after German antitrust authorities in 2007 blocked the planned $2.8bn sale of ReSound to Swiss rival Sonova.

Analysts said the ruling could spark takeovers in the hearing aid manufacturing industry, where GN and Sonova are among the world leaders along with Germany’s Siemens and Danish rival William Demant Holding.

“(The) German Federal Supreme Court acknowledges GN’s position and overrules prohibition of GN ReSound’s sale to Sonova,” GN Store Nord said in a statement.
GN said the court had overruled the German Court of Appeal’s 2008 decision and a 2007 decision of the German Federal Cartel Office to prohibit the sale of GN ReSound to Sonova.

GN spokesman Morten Kjellev said the company did not expect any economic gain from the court ruling, and the aim of the appeal had not been to revive the sale, though the judgement cleared away barriers to consolidation of the industry.

“It is not the intention that we would now go out and put ReSound up for sale again,” Kjellev said. “This case is not something that gives an opportunity for compensation...We did it to prove that the German authorities were wrong.”

Sonova said it had no plans to make a new offer for ReSound. “The ruling changes nothing for us,” a Sonova spokeswoman said. “We wanted to buy GN ReSound in order to grow. We have now become the biggest hearing aid maker through organic growth. We do not need GN any more.”

The spokeswoman said the ruling made mergers between the big hearing aid manufacturers “possible again in theory”. But she added: “We have no plans to buy one of the other big hearing aid makers. We can make hearing aids on our own.”

“We estimate that the German supreme court’s decision once again opens up for consolidation in a sector that time and again has pointed out the necessity of that,” Alm Brand Markets said in a note to clients.

Alm Brand said the chance to sell ReSound to a sector player who could get synergies out of a deal “increases the value of GN ReSound markedly”.

“However, we do not expect that GN will immediately restart a sale process, as they are still working to increase earnings through cost-cutting,” Alm Brand said, adding that a sales process could be started some time after this year.

Siemens last month dropped plans to sell its hearing aid business after it got bids that sources close to the deal said the company saw as too low.

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