Demant's loss is Cochlear's gain as Danish giant jettisons its implant business



© Demant/Cochlear

Demant has announced an agreement to turn over its hearing implants business, Oticon Medical, to Cochlear. The price: DKK 850 million (US$122.3m). For the reasons, read on.

In its press release dated April 27, 2022, the Danish hearing solutions group Demant explained its conclusion that it will take too long and too much investment to make its implants business a global leader. The effort would mean a "significant dilution of the Group’s profitability".

Cochlear will attend to Oticon Medical's current patients

"Demant believes it is in the best interest of both patients and the company to divest its Hearing Implants business to Cochlear, which is the global leader in implantable solutions for hearing loss. As part of the transaction, Cochlear has committed to servicing existing patients of Oticon Medical now and in the future," the announcement clarifies.

Søren Nielsen, President & CEO of Demant has made the following official statement: "“Overcoming the challenges of hearing loss – and living with implant technology to alleviate this – is a lifelong journey, and we believe it is best for our patients to continue this journey with Cochlear. We will do everything in our power to ensure minimal implications of the intended divestment for customers and patients as well as the employees of Oticon Medical, who have delivered beyond expectations and are some of the brightest minds in the industry,”

“Demant remains fully committed to hearing healthcare and audio technology. We will continue to grow and expand in hearing aids, hearing care and diagnostics, where we are uniquely positioned to service users and customers from the first screening, over the first fitting to continued personalised care, and to pursue the strong growth potential in communications with our EPOS brand.," continued Nielsen.

Cochlear anticipates greater scale and an R&D boost

"We will work closely with Demant to ensure a seamless transition of the business to Cochlear to ensure continued access to current Oticon Medical technology for customers and patients in the coming years," said Cochlear CEO and President, Dig Howitt.

"The acquisition of Oticon Medical will provide us with greater scale and will enable us to increase our investments in R&D and market growth activities.”

The financial details

Subject to regulatory approvals and other customary closing conditions, the transaction - the divestment of Demant’s cochlear implants (CI) and bone anchored hearing systems (BAHS) product categories for a total of DKK 850 million, DKK 700 million paid in cash at closing, and DKK 150 million within 18 months after closing. Closing is anticipated for H2 2022 and following consultation of relevant workers’ councils.

Demant sees the divestment having no impact on the Group’s medium- to long-term outlook. The group reports that its 2021 Hearing Implants business had a dilutive impact on the Group’s EBIT margin of 1.2 percentage points.

Excluding Hearing Implants from the Group’s outlook for 2022 has a positive impact of around DKK 150 million on the Group’s expected EBIT for the full year. Consequently, the Group now expects EBIT of DKK 3,600-3,900 million (previously DKK 3,450-3,750 million). The impact on other outlook metrics is neutral, says Demant.

Source: Demant