GN Hearing, a division of GN Store Nord A/S, Ballerup, Denmark, is divesting its hearing testing device segment and has entered into an agreement to sell GN Otometrics to Natus Medical, San Carlos, Calif, for US$145 million to be settled in cash on a debt and cash free basis. Closing of the transaction is subject to regulatory approval and is targeted by end of 2016.

Otometrics—which owns the Aurical, Madsen, and ICS brands, as well as Audiology Systems and GENIE sound rooms—is the world’s largest developer and manufacturer of hearing and balance assessment equipment. Its products include testing equipment and software for newborn hearing, audiologic diagnostics, and comprehensive hearing testing and fitting, and includes audiometry, immittance, evoked potential, infant screening, video otoscopy, ENG/VNG, calorics, and balance platforms. Natus is a Nasdaq-listed company (BABY) with revenues of US$376 million in 2015, and is a leading provider of healthcare products and services used for the screening, detection, treatment, monitoring, and tracking of common medical ailments in neurological dysfunction, epilepsy, sleep disorders, newborn care, hearing impairment, and balance and mobility disorders.

Otometrics comprises about 8% of GN’s total revenues, and its revenues in 2015 were DKK 649 million (US$98 million) with a 2% organic growth rate which was in line with an overall hearing diagnostic market growth rate of 0-2%. However, the worldwide diagnostics market has experienced a slowdown, with unusually low tender activity. According to GN, the divestment is designed to strengthen GN Hearing’s focus and strategic direction as a dedicated hearing instrument company, with GN Hearing being in a unique position to continue to deliver industry leading growth and profitability.

GN Hearing reports that the company and Natus have also entered into a strategic partnership to collaborate on future technology, product development, and commercialization. This appears to be similar to the strategic development initiative that GN currently has with Cochlear Corp. Additionally, what is anticipated to be the world’s first complete digital ear scanning solution, OTOSCAN, will be fully commercialized by Natus with future royalties to GN Hearing.

Jim Hawkins

Jim Hawkins

“The combination of Natus and Otometrics creates a global leader in hearing assessment, hearing screening, and balance assessment, said Natus President and CEO Jim Hawkins in a press statement. “The Otometrics brand will complement our current portfolio and will further increase our combined growth potential.”

“The agreement with Natus underlines GN’s dedicated hearing instrument strategy as well as GN Hearing’s focus on strategic partnerships, as most recently seen in the agreement with Audigy Group in North America,” said GN CEO Anders Hedegaard. “The strategic partnership will benefit GN Hearing and Natus in general, specifically in connection with the innovative OTOSCAN technology to be launched next year. Also, I am certain that GN Otometrics and its employees will benefit from being part of the large Natus group and from Natus’ proven ability to successfully integrate acquired companies.”

The selling price of $145 million is approximately 10x its EV/EBITDA of $15.1 million, but this may not take into account the amount that Natus will need to invest for the completion of the OTOSCAN technology as well as other expenses related to its commitments to Audiology Systems.

Anders Hedegaard

Anders Hedegaard

New 2017-2019 corporate strategy for GN. Also, just ahead of the hosting of its capital market day (CMD) being held today, GN announced its strategy for 2017-2019 that aims to deliver for GN Hearing annual organic revenue growth of 6-8% with EBITA margin of 20-22%. It also targets for GN Audio (maker of Jabra headsets) an annual organic revenue growth of 6-9%, with EBITA margin of 17-19%.

Its 2017-2019 strategy is called “Hear more, do more, be more,” which reportedly builds on three cornerstones: Innovation Excellence, Commercial Excellence, and People Excellence. In recent years, GN has transformed into a global leader within medical hearing instruments and professional and consumer headsets. With a focus on innovation, GN has been generally applauded by market analysts for delivering on its 2011-2013 strategy, as well as on its more recent 2014-2016 strategy. According to the company, GN has established an innovation framework that will continue to deliver uniquely on products and solutions that help people “hear more, do more, be more.” In a press statement, it says it will continue to upgrade and enhance its commercial approach and an empowered performance-minded organization will be the foundation for continued strong profitable growth in 2017-2019.

The company also continues to hint further at the melding of its hearing and headset technologies in what many industry observers see as “hearable”-like products—incorporating both hearing aids and consumer-desirable functions found in hearable products. It says that, by combining knowledge in medical hearing instruments with professional and consumer headset capabilities, oGN will be uniquely positioned to develop intelligent audio solutions from 2017-2019 that allow its users to “hear more, do more and be more” than they ever thought possible.

“We are very excited to launch our 2017-2019 strategy, which we are confident will further strengthen GN’s leading position in our core industries,” said Hedegaard, and GN Audio CEO René Svendsen-Tune in a joint statement. “We want to be an organization that “hear more, do more, be more” and that delivers on this promise to our customers and users based on the three strategic cornerstones of Innovation, Commercial and People Excellence. We have a very strong momentum and a unique foundation for continued strong growth.”