Demant expands in German through 700 million euro Kind deal

By Agnieszka Olenska and Jesus Calero

(Reuters) -Danish hearing solutions provider Demant will buy Germany's Kind Group for 700 million euros ($799 million), it said on Wednesday, marking the company's largest acquisition to date and sending its shares up 5%.

WHY IS IT IMPORTANT?

Demant's Kind acquisition is seen by analysts as part of a broader turnaround, with the Danish company regaining ground through new products, U.S. re-entry and French market renewal, just as Swish peer Sonova's edge begins to fade.

BNP Paribas Exane hiked its recomendation to "outperform", noting the company is turning a corner after a tough two-year spell of earnings downgrades and strategic setbacks.

Citi views the deal as a "strategically sensible" move that transforms Demant into Germany's market leader, boosting its share from 4% to 12%.

The Danish hearing aid maker will finance the acquisition with debt, and it is suspending its ongoing share buyback in the meantime, while maintaining its 2025 outlook.

KEY QUOTES

"Germany has been a focus market in recent years, basically because it was the only market left with a significant below share of hearing care activities compared to the rest of the world," Demant CEO Soren Nielsen said in a conference call.

BY THE NUMBERS

Demant CFO Rene Schneider said in a conference call the acquisition will be financed via a bridge loan at a lower rate than the company's average cost of debt.

The company expects its debt to rise to 3.5 times EBITDA after the deal closes in the second half of the year, but aims to cut it back to its target range of 2–2.5 times within 18 to 24 months.

($1 = 0.8766 euros)

(Reporting by Agnieszka Olenska and Jesus Calero; editing by Matt Scuffham)