German conglomerate Siemens AG today announced the sale and transfer of its healthcare undertaking in the country for a consideration of Rs 3,050 crore to its subsidiary Siemens Healthcare on a slump sale basis in its bid to strengthen focus on the sector.
“The transaction, as part of the global realignment of healthcare business to separately manage healthcare business, will enable Siemens to increase its focus on, and capital allocation to power generation, transmission and distribution, mobility, industrial automation and smart cities segments in the country,” Siemens India Managing Director and Chief Executive Sunil Mathur said in a note. He said the deal enables Siemens AG to further strengthen its focus on the healthcare segment here by aligning it with its global strategy and management framework.
He also said the parent has decided to offer 50 per cent of the sale proceeds, after applicable capital gains tax and dividend distribution tax, as special dividend. The statement further said the proposed transaction, recommended by the audit committee, is based on the valuation undertaken by two independent valuers — Deloitte Touche Tohmatsu India and KPMG India. The company said the transaction, as a going concern, is subject to regulatory, statutory and shareholder approvals.
Mathur further said the transaction follows Siemens AG’s global strategy of managing its healthcare business under a separately-managed company. “Over 85 per cent of our healthcare revenues now come from products imported from Siemens AG. Significant management focus, including investments will be needed in finding appropriate products and solutions to meet the growing demands of the Indian market as there are limited synergies between the healthcare and other businesses of Siemens,” Mathur said.
The decision comes amid increasing government spending, preference for locally manufactured products as also healthcare revenues are largely coming in from smaller cities, where preference is for value products. Another reason is that Siemens’ healthcare business is highly dependent on Siemens AG and its subsidiaries for products and technical know-how. Yet another reason is the significant long-term investments required for localisation of products and solutions.
That apart, the company also cited the global best practice where majority of companies are hiving off healthcare business into separate units. Hiving off will allow increased flexibility, greater entrepreneurial freedom and faster decision-making to grow the healthcare segment independently in this market, it said. Citigroup India acted as the transaction advisor to Siemens in the transaction.