Siemens Arm’s $16.4 Billion Varian Deal Opens Path to DAX

The $16.4 billion purchase of Varian Medical Systems not only gives Siemens Healthineers AG an entry into cancer treatment — one of the hottest areas in medical technology — but also opens a potential path into Germany’s benchmark DAX index.

“We’ll create additional free float which eventually will lift us into the DAX,” Chief Executive Officer Bernd Montag said in an interview with Bloomberg TV. “We are very certain about this transaction, it’s the right time, and we are super confident about financing.”

The Erlangen, Germany-based maker of MRI machines and laboratory equipment announced Sunday it’s offering $177.50 a share for Palo Alto, California-based Varian, 24% more than its closing price on Friday. Bloomberg was first to report the offer on Saturday.

With Varian, Healthineers will gain market share in devices and software used for cancer therapy. Recent developments in radiation therapy, coupled with more precise imaging, have been linked to lower cancer death rates, which Montag said the company is keen to capitalize on.

The deal has “clear strategic rationale,” Citigroup analyst Kate Kalashnikova said in a note. “The combined company will have the most comprehensive cancer portfolio in the industry.”

Shares of Siemens Healthineers declined 1% to 43.50 euros as of 9:04 a.m. in Frankfurt. Varian jumped 23% to $176 in premarket trading.

“Varian will get access to our broad clinical data pool, which will enable us to more quickly develop a wider range of personalized and precise therapies,” Montag said in a call Sunday.

The deal is the biggest health-care acquisition this year.

Siemens Holding

The purchase will be financed through both debt and equity, Siemens Healthineers said. That includes a 15.2 billion-euro ($17.9 billion) bridge loan from parent Siemens AG, followed by a capital increase this year that Siemens won’t participate in.

As a result, the parent company’s stake in Healthineers will decline to about 72% from 85%, Siemens said.

What Bloomberg Intelligence Says:

Siemens Healthineers’ proposed purchase of Varian Medical Systems is at a hefty 28% premium to 2021 consensus EV/Ebitda estimates. The price tag seems partly based on the 300 million euros of synergies Healthineers targets by 2025, mainly from revenue opportunities.

Johnson Imode, BI industrials analyst

Healthineers Paying Varian Premium as Siemens Eases Grip: React

Healthineers’ possible inclusion in the DAX index has been a burning question for investors and analysts since the company was brought to market by Siemens in 2018. Because of Healthineers’ small free share float, the company has been left out despite an almost 44 billion-euro market capitalization.

Joining Germany’s largest companies in the benchmark index would raise Healthineers’ profile with investors and signal further independence from Siemens. Acceptance into the index would also force the many investment funds that track the DAX to buy the company’s shares.

The index has seen more turmoil than usual recently, with Deutsche Lufthansa AG exiting after 32 years. Scandal-plagued Wirecard AG may be the next to depart.

— With assistance by Manus Cranny, Nejra Cehic, and Jan-Patrick Barnert


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