Siemens set to price Healthineers IPO in lower half of range: bookrunner

FRANKFURT (Reuters) - Siemens SIEGn.DE is set to price the initial public offering (IPO) of its medical equipment unit Healthineers SHLG.DE in the lower half of its guidance range, one of the bookrunners indicated after the deadline for offers.

FILE PHOTO: Siemens Healthineers logo is seen on an item of clothing in manufacturing plant in Forchheim near Nuremberg, Germany, October 7, 2016. REUTERS/Michaela Rehle/File Photo

“Books are closed. Orders below 28 euros per share risk missing the deal,” the bookrunner said in a message to investors.

Siemens had offered the shares in a range of 26 to 31 euros. A price of 28 euros would value Healthineers at about 28 billion euros ($35 billion), making it one of Germany’s biggest listings in recent years.

But that would be well down on initial expectations of 35-40 billion euros. Investors have cited uncertain prospects for Healthineers’ diagnostics business - machines for high-throughput testing of blood and urine - and slightly more volatile markets, which have pushed valuations off record highs.

The stock is set to start trading on the Frankfurt Stock Exchange on Friday.

The listing is aimed at enabling Healthineers to raise its own funds for takeovers and investments as well as crystallizing its standalone value - removing some of the “conglomerate discount” that some investors say weighs on Siemens’ valuation.

Siemens, which is selling a 15 percent stake in the world’s largest maker of medical imaging equipment, is set to reap 4.2 billion euros in proceeds.

Healthineers’ management has said it will catch up quickly with established diagnostics competitors, but Sebastien Buch from fund manager Union Investment - a top 10 Siemens shareholder, which is buying into the IPO - voiced some doubts.

“On paper, (Healthineers’ diagnostics platform) Atellica shows great performance metrics. But it is a new platform with hardly any track record,” Buch told Reuters.

He also said rivals such as Roche ROG.S and Abbott ABT.N had functions to include molecular diagnostics that Healthineers still lacked.

“A discount is warranted as investors are skeptical about how successful the roll out (of Atellica) will be. The preceding five Siemens diagnostics platforms continually lost market share over the last couple of years,” he said.

The Healthineers IPO, which investors have hailed as a pure-play medical technology (medtech) investment, is one of Germany’s biggest listings since the IPOs of Deutsche Post and Infineon in 2000 and Innogy’s flotation in 2016.

The company could be on track to join Germany's midcap index .MDAXI in June via a fast-track entry mechanism, which allows for any company ranking among the top 45 companies - in terms of free-float market capitalization and trading volumes - to join the index ahead of the normal assessment date.

“With its expected free float market cap of about 4.2 billion euros, Healthineers currently ranks 18th and clearly exceeds the 1.9 billion needed for fast entry inclusion,” said Silke Schluensen, index specialist at brokerage Oddo Seydler, adding the shares also needed trading volumes of about 230,000 units a day, which appeared doable.

"If Healthineers is classified as technology it would join the TecDax .TECDAX easily as it would rank fourth in market cap and would need trading volumes of only 120,000 shares a day," she said.

From September, Deutsche Boerse is planning to allow tech companies to also join other indices.

($1 = 0.8104 euros)

Reporting by Arno Schuetze; Editing by Mark Potter