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Siemens Healthineers acquires Varian for $ 16.four billion

© Reuters. An employee works on a magnetic resonance scanner in a Siemens Healthineers production line in Shenzhen

By Douglas Busvine

BERLIN (Reuters) – German health group Siemens Healthineers (DE 🙂 said on Sunday it would purchase Varian Medical Systems Inc (N 🙂 in a deal that valued the US manufacturer of cancer treatment equipment and software at $ 16.4 billion.

As part of the agreed transaction, Siemens Healthineers will purchase all shares in Varian for $ 177.50 each in cash, which is a 24% premium over the US company's closing price on Friday.

The industrial conglomerate Siemens (DE :), which Healthineers spun off in 2018 but retains a majority stake in, will provide bridge funding for the business, which aims to create a leading global provider of cancer treatment solutions by 2025.

"With this combination of two leading companies, we are making two leaps in one step: a leap in the fight against cancer and a leap in our overall impact on healthcare," said Bernd Montag, CEO of Siemens Healthineers.

Dow Wilson, President and Chief Executive Officer of Varian, said: "With Siemens Healthineers, we will transform the care of a larger number of patients worldwide and expand the opportunities for our employees as part of a larger and more global organization."

The deal, first reported by Bloomberg, must be approved by Varian’s shareholders and regulators. It is expected to close in the first half of 2021 and improve underlying Siemens Healthineers basic earnings per share within 12 months.

BALANCE SHEET SUPPORT

Siemens is leveraging its balance sheet to fund the business and is providing Healthineers with a € 15.2 billion bridging loan ($ 17.9 billion).

The medical technology department is aiming to replace 50% of this with a rights issue this year, provided the market conditions allow it.

Siemens said in a separate statement that it specifically welcomed the deal and would raise the money for the bridging loan by issuing bonds. As a result, the proportion of healthineers would be watered down from 85% to about 72%.

Regardless, Healthineers' third quarter results, which were released ahead of Monday due to the announcement of the acquisition rather than Monday, showed a 6.9% year-on-year decrease in sales of EUR 3.3 billion on a comparable basis due to the effects of the coronavirus pandemic .

The adjusted operating margin was 13.9%, 1.2 percentage points below the previous year, while the basic earnings per share fell by 21% to 30 cents.

Revenue is expected to remain unchanged for the 2020 financial year, while adjusted basic earnings per share will be between 1.54 and 1.62 euros compared to 1.70 euros in the previous year, provided the business environment does not deteriorate further. ($ 1 = 0.8493 euros)

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