Microbiology sale

The health care division of Munich-based Siemens had the highest profit margin of the company’s four businesses in 2013, according to data compiled by Bloomberg. Siemens CEO Joe Kaeser has sought to spin off parts of the health unit and focus the rest of the company on “electrification, digitalization and automation.”

Siemens stock declined 1 percent, or 90 cents, to 89.22 euros, the lowest in almost five months, at 12:16 p.m. in Frankfurt. That extended the decline this year to 10 percent, valuing the company at 78.6 billion euros ($105 billion).

“The sums involved are not enormous, but investors should not underestimate the strategic significance,” London-based Morgan Stanley analyst Ben Uglow wrote in a note to investors, reiterating his equal-weight rating on the shares. “CEO Kaeser is addressing businesses previously deemed ‘sacred’ within the company.”

Danaher Corp.’s Beckman Coulter last month agreed to buy Siemens’s clinical microbiology business in a deal expected to close in the first quarter of 2015. While no terms were disclosed, Siemens said July 31 it didn’t expect any material profit from the sale. Siemens divested eight businesses last year, the most of any European industrial company, according to Bloomberg Intelligence data.

Specific requirements

Combined with Siemens’s health IT unit, Cerner said it expects annual sales of $4.5 billion, about $1.6 billion more than in 2013. Research and development expenditures will be about $650 million annually, Cerner said, about $311 million more than in 2013, according to data compiled by Bloomberg.

“We realized that business success of our hospital information systems could not always keep pace with our competition,” Hermann Requardt, the head of Siemens’s health care operations, said in a statement. “An increasing number of country-specific re-quirements, such as resulting from US healthcare reform, make it increasingly challenging to achieve sufficient scale effects.”

Cerner said it will continue to support an electronic records system developed by Siemens for at least a decade. Under the strategic alliance, each company will contribute as much as $50 million over three years toward “projects of shared importance,” Cerner said.

‘Meaningful users’

The electronic health records business in the United States is led by closely held Epic Systems Corp. of Verona, Wisconsin, which supplies about 19 percent of hospitals and 20 percent of doctors’ offices that have declared themselves to be “meaningful users” of the systems, according to data from the Centers for Medicare and Medicaid Services analyzed by Software Advice. Cerner supplies about 9 percent of U.S. hospitals.

Greenhill & Co. is acting as Cerner’s financial adviser and Latham & Watkins is legal counsel. JPMorgan Chase & Co. is acting as financial adviser to Siemens and Clifford Chance is its legal adviser.

With assistance from Aaron Kirchfeld in London.

Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.