Sonova buys AudioNova in $953m deal

(Reuters) — Swiss hearing aid maker Sonova Holding AG (SIX:SOON) is buying Dutch-based AudioNova for €830 million ($953 million), its largest acquisition, to expand a network of European stores where it will jettison rivals’ products in favor of its own.

The cash deal to buy AudioNova from Curacao-based investment company HAL Holding N.V. will add 1,300 stores in 8 European countries. That more than doubles Sonova’s presence in Europe and boosts its worldwide store total to more than 3,300.

AudioNova now sells more than 300,000 hearing aids a year from different providers. Sonova products – its brands include Unitron and Phonak – account for about 25% of that figure.

Over the next 2 years, however, CEO Lukas Braunschweiler said he plans to boost Sonova’s share of AudioNova’s sales to about 95%.

It’s not uncommon for hearing aid retailers to switch brands, Braunschweiler said, so he did not fear a customer backlash by swapping out rival products.

“Usually we bring share-of-wallet in our own retail chains up to about 95% of our own products, that’s the rule after 2 years, and we have about 5% other products left,” he explained.

AudioNova is expected to generate 2016 sales of approximately €360 million and an EBITDA margin of around 16%, Sonova said, adding the acquisition will lift earnings per share starting in the financial year 2017/2018.

Sonova shares rose more than 3% in early business, boosting their rise to 4.2% this year.

Bank Vontobel analyst Carla Baenziger said the transaction will give Sonova “critical size” in the retail market and is likely to be a blow to rival William Demant Holding (CPH:WDH) , which has supplied AudioNova with hearing aids.

“The takeover is certainly bad news for WDH on volumes,” Baenziger wrote in a note to investors.

William Demant has been buying retailers, too, including a move last year in France to snap up Audika. Demant did not immediately respond to an email seeking comment.

Sonova lifted sales last year by 4% to just over 2 billion Swiss francs ($2.09 billion).

Braunschweiler said Sonova won an auction run by ABN Amro, which advised HAL Holding, in which there were 6 bidders in the final stages, including 3 financial bidders and 3 strategic investors, including Sonova.

“It was a competitive race,” said Braunschweiler, whose company’s advisory team included Credit Suisse.

Sonova will finance the deal, which is expected to close in the 2nd half of this year, with cash and debt. It suspended a share buyback program.

($1 = €0.8705, $1 = 0.9555 Swiss francs)

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