Amplifon SpA's biggest-ever acquisition will help the hearing-aid company's goal to speed its expansion in the fast-growing US market, Chief Executive Officer Enrico Vita said.
"One of my long-time objectives was how to further accelerate in the US, which is the world's largest market in our sector," he said in an interview Monday after Amplifon agreed to buy the hearing-aid business of GN Store Nord A/S in a deal valued at 17 billion Danish kroner ($2.6 billion).
"It is a market that -- aside from very recent developments -- is structurally growing at extremely high rates," Vita said. The acquisition will make the US Amplifon's largest market and bolster its position through the addition of GN Hearing's brands and distribution channels, he added.
The Americas accounted for about 21% of Amplifon's revenue last year, a percentage that will rise to 29% following the deal, according to an investor presentation. The company expects the transaction to close by the end of this year.
The cash-and-stock deal will turn Amplifon, currently a retailer of hearing aids, into a vertically integrated company by adding R&D, manufacturing and a commercial network, the company said. "The goal is to combine GN's technological capabilities and innovation capabilities with our knowledge of the consumer," Vita said.
Amplifon shares fell as much as 13% after the company said it expects to raise as much as €750 million ($858 million) in equity to help finance the deal.
The combined business will have revenue of about €3.3 billion and a presence in more than 100 countries. Vita indicated it's too early to give specific financial targets, but said he plans to keep growing faster than the industry, which historically has expanded by 4%-6% annually.
Analysts at Citigroup said Amplifon's acquisition of GN Hearing may reduce purchases from rival manufacturers, such as Demant A/S and Sonova Holding AG. While competitors could see short-term sales gains, the longer-term impact will depend on whether Amplifon can maintain GN's pace of innovation and how the deal reshapes industry competition.
The use of technologies such as artificial intelligence to help with hearing has attracted new players including EssilorLuxottica SpA, a much larger manufacturer that's been incorporating audio enhancements into eyewear. Vita said Amplifon's move wasn't a response to heightened competition.
"We are creating a global leader in the audiology segment, which requires highly specialized technology," Vita said.