- Published on 17 June 2022
ShengWang, the Chinese hearing aid chain of some 500 stores this month fully acquired by the Danish hearing giant Demant, brings the makers of Oticon and Philips devices 5% of the Asian country's retail market share.
This is a "significant strategic transaction" says Demant, which began the purchase with a 20% minority investment in March, completing the remaining 80% of the deal this June, 2022.
Growth prospects, but how key is the pandemic factor?
Demant's announcement of the completion of the ShengWang acquisition is upbeat, trumpeting that in its latest financial year ending 31 December 2021, ShengWang reported revenue of RMB 309 million (aprox. 39.7m euros) and a slightly positive EBIT margin.
The Danish group expects ShengWang's revenue runrate to be in the region of RMB 400 million (56.7m euros). And in the short term, with the transaction closing at the beginning of the second half of 2022, the group is hoping for the transaction to add slightly less than one percentage point to the Group’s revenue growth in 2022.
"Over the coming years, ShengWang is expected to deliver above-market growth rates and to gradually increase its EBIT margin as the network expands and matures," Demant anticipates.
But these anticipated divvies depend on operating in a fully normalised market, and the Chinese government's pursuance of a zero-Covid policy currently intensifies the shadow of continuing lockdowns and restrictions.
And Demant recognises that ShengWang's revenue and EBIT were "significantly impacted by the coronavirus pandemic and also by the establishment of many new clinics in recent years, which are typically less profitable than more mature clinics. "Due to coronavirus and local lockdowns that have continued to significantly impact the Chinese hearing aid market in H1 2022, ShengWang has seen material negative growth in H1 and EBIT has been negative, but the long-term growth prospects for the business remain very strong," the group optimistically affirms.
1,300 new employees for Demant
Søren Nielsen, President & CEO of Demant, underlined the importance of China, stressing that the huge country "is on a clear path to becoming one of the two biggest hearing aid markets in the world in this decade, and ShengWang is already a strong and trusted business partner for Demant and has been so for several years."
ShengWang has for some time been selling Demant-manufactured hearing aids under the Philips brand, business that has helped to strengthen the relationship between the retail chain and the Danish hearing aid titan, which will now be responsible for ShengWang's numerous employees.
“I am very excited to welcome more than 1,300 new employees to the Demant Group with the acquisition of ShengWang," added Nielsen.