News Feature | November 14, 2016

Siemens May Spin Off $15B Healthcare Business, Siemens Healthineers

By Suzanne Hodsden

Siemens CEO Joe Kaeser announced that the company may be looking to sell a portion of Siemens Healthineers as the corporation shifts focus to energy and industrial equipment. Kaeser did not specify a timeline for the spinoff, but commented that the company intends to remain a long-term majority shareholder, and will continue to strengthen the business based on current trends within the healthcare industry.

Kaeser reported in an earnings call that Siemens — as a whole — suffered a decrease in profits and expects soft numbers moving into 2017, based on an uncertain geopolitical environment. Siemens has shed much of its consumer-based product businesses — including lighting, automotive, and communication, reported Reuters, strategizing on core industrial businesses.

Siemens’ healthcare division — rebranded “Siemens Healthineers” earlier this year — delivered on promises made by the Vision 2020 restructuring plan announced in 2014, which granted the health division more operational freedom.

Kaeser reported that diagnostic imaging has driven profitability, particularly in Asia. Following the successful rollout of Healthineers’ telecom platform, Kaeser noted that Healthineers expects to “catch up with competition” in lab diagnostics.

During the Q&A portion of the call, Kaeser reiterated Healthineers’ strategy to shift from a product-based approach to a solutions-based healthcare business. In July, Healthineers brought Enterprise Services to the U.S., a healthcare IT solution that offers equipment management services, financial and asset management, and operational capabilities.

“Transformation in the healthcare market continues with a paradigm shift now emerging. There is a clear temptation from transaction-oriented product business to solving multi-hospital system challenges worldwide,” said Kaeser, noting that, as specifics of the IPO are carefully considered, Healthineers will continue to grow with this paradigm in mind.

Morgan Stanley analyst Ben Uglow told Bloomberg that the timeline of the anticipated spinoff is not yet clearly defined, and it could occur any time within the next few years. In a press conference, Siemens CFO Ralf Thomas echoed Kaeser’s assertion that the company may elect to retain a majority share of the business.

“Processes have their own dynamic,” Thomas told Reuters. “We are happy to keep healthcare under the Siemens roof.”

Kaeser told investors that decisions regarding the spinoff would be made in the best interest of Healthineers’ long-term growth and strength.

“The healthcare business is a very strong business in Siemens because we have the technology which is industry leading and there are few areas which don’t do that well as they should and as they could,” said Kaeser.  “And that's all challenging which we’re considering and that's - honestly that’s the message we want to give. We do what we say. We execute on what is good for the company. And there's a lot of aspects to be considered.”

Siemens Healthineers recently acquired Conworx, a move that will provide an integrated data management solution for the healthcare industry’s variety of point-of-care devices and manufacturers.