A potential ruling by the UK Competition and Markets Authority has stalled Demant’s divestment of Oticon Medical to Cochlear Limited.
The UK Competition and Markets Authority (CMA) published its Provisional Findings and Notice of Possible Remedies in relation to a transaction involving the divestment of Demant’s hearing implants business, Oticon Medical, to Cochlear Limited.
In its report, the CMA provisionally concluded that the contemplated transaction may be expected to result in a substantial lessening of competition (SLC) in the supply of bone conduction solutions in the UK.
The CMA will now consult on its provisional findings and consider any further views before issuing its final report, expectedly by June 5, 2023.
Demant will continue, with Cochlear, to engage constructively with the CMA in order to address the concerns raised. The company believes it is in the best interest of patients and the company to divest its hearing implants business to Cochlear, which is the global leader in implantable solutions for hearing loss.
As part of the transaction, Cochlear has committed to servicing existing patients of Oticon Medical now and in the future.
Besides awaiting a final decision by the CMA, the transaction is currently undergoing review by the Australian Competition and Consumer Commission (ACCC) and the European Commission (EC). Also, the transaction is pending clearance under the French Foreign Direct Investment (FDI) rules.
Irrespective of the outcome of the ongoing investigations by competition authorities, Demant remains committed to its decision to discontinue the hearing implants business. The company says that there is no change to its conclusion that the prospect of becoming a global leader in hearing implants is not achievable within a reasonable timeframe without disproportionate levels of investments and significant dilution of the group’s profitability.
In light of the CMA’s provisional findings, the transaction is no longer expected to close in Q2 2023, and Demant is currently unable to provide an updated timeline. Further announcements on the contemplated transaction, including an updated timeline, will be made in the future.
If the transaction has not closed by December 31, 2023, the group’s profit after tax from discontinued operations in 2023 is expected to be negative by DKK (Danish Krone) 100-200 million (previously negative by around DKK 100 million when assuming closing in Q2 2023).
There would be no other impacts on the group’s outlook for 2023.
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