Siemens Opts To Retain Healthcare Business

By Jof Enriquez,
Follow me on Twitter @jofenriq

After hinting earlier at plans to sell its healthcare division, German conglomerate Siemens AG recently agreed to keep the business, despite a corporate streamlining strategy.

Following talks with trade union IG Metall, Siemens decided to keep the unit as “part of its long-term, strategic core portfolio” and try to maintain majority ownership — even if the business is listed on the stock market, according to the union’s online newsletter cited by Reuters. The union forged a deal with Siemens that eliminates healthcare redundancies. According to the agreement, Siemens must also maintain or expand its healthcare jobs base and keep the unit’s headquarters and key operations in Germany.

Before the agreement, Siemens was reportedly planning to spin-off its healthcare business due to concerns that the company may need more investments in order to keep up profitability and compete with rivals GE and Philips.

Its supervisory board convened in early November to explore the possibility of creating new healthcare units in different countries under a plan that would have made the whole €14 billion ($17.5 billion) healthcare division completely independent from Siemens, according to Health Investor. However, talks with workers have prompted a turnaround, although Siemens has not released a statement about the rationale behind its decision to keep the unit.

Siemens chief executive Joe Kaeser has implemented a streamlining strategy that aims to focus on the energy sector and get rid of non-core assets. Despite holding on to its healthcare unit, however, Siemens has slowly divested portions of the company in recent months.

Siemens recently said that it was pushing through with its sale of its audiology business to private-equity firm EQT Partners and Santo Holding for €2.15 billion ($2.68 billion), according to the Wall Street Journal. Siemens will retain a $200 million stake in the hearing aid business. The company had earlier sold its hospital information technology and microbiology businesses to Cerner Corp. and Beckman Coulter, respectively.

Siemens Healthcare’s fourth-quarter profit dipped 1 percent to €611 million ($759 million) from €616 million ($766 million) last year, which was diminished by weaker earnings in imaging and therapy systems, including unfavorable currency effects, according to a recent earnings report. Fourth-quarter revenue for the healthcare business increased 3 percent from the prior year.