Siemens’ Healthineers may not be stepping into US market after all
Many companies use IPOs as a sort of floatation gadget. Over the years, companies have given varying reasons for launching IPOs. Companies such as the recently filed China Finance Trust wanted to simply increase their revenue stream. nothing like more money to fund expansion. Clinical-stage Big Pharma firms typically trade their shares to fund clinical trials. Other enterprises enter the market to gain attention from consumers- especially if they’re foreign. From time to time a company may get a better offer that forces it to up its filing price, cut it by a fraction, or simply do away with it. This is the kind of choice that the German-based conglomerate Siemens Inc. has to make.
Siemens (OTCPK: SIEGY) began its healthcare division a few years ago to help it compete with some of its peers. Companies like Toshiba and General Electric had had healthcare departments for years before Siemens decided to join in the medical trend. The company named this unit the Healthineers in 2016 earning. You can imagine that the name earned Siemens a few raised eyebrows for that one. To hear the Siemens management talk about it, Healthineers was established to focus on medical advancement that would give Siemens a competitive edge in future. So far the only thing the world has seen from the department is advanced therapy treatments and diagnostic imaging. These techniques help in medical research, sure, but they’re in no way unique.
In the fourth quarter of 2016, Siemens announced that it would be taking Healthineers public in April of this year. The department, which is valued at an approximate $30 billion as of March 31st, 2017, is the most profitable in the German industrial empire. Some analysts have speculated that the division could, in fact, be worth as much as $40 billion. By the end of 3Q16, Healthineers recorded revenue of $1.25 billion, up twenty percent from its 2015 earnings in the same period. to add to that, Healthineers’ EBIT margin rose from 16.9 to 17.2 from 2015 to 2016. While Barclays Capital still rates this margin as underperforming, the increase showed a positive shift in the company’s finances.
Healthineers, with its upward trend, would have been a profitable trade-off for any investor. Healthineers had plans to expand its market and therefore its value. Proceeds from the IPO would have gone into Healthineers’ US-based health research lab Atellica. Atellica is the lab the department is currently working on diagnostic imaging for medical purposes. If the lab succeeds, the future of research like DNA imaging could be that much easier. With the lab’s expansion and innovative practices, Healthineers would possibly have achieved its goal of being the best healthcare provider globally.
Healthineers competitors in the US include Baxter (BAXN) and Ambu (AMBU). Had it listed in the US market, the firm would have traded on NASDAQ. Goldman Sachs would have been the underwriter in the deal. It is not yet evident that the company will not list in the US stock markets. The only sure fact at the moment is that the company’s IPO will be put on hold as it considers a merger to finance its expansion.