By Stine Jacobsen and Arno Schuetze
COPENHAGEN/FRANKFURT (Reuters) - Hearing aid makers Widex and Sivantos agreed to merge on Wednesday to form the world's third-largest supplier behind market leaders Sonova (S:SOON) and William Demant (CO:WDH).
Germany's Sivantos, formerly known as Siemens Audiology, and Denmark's Widex will create a company with an valuation of more than 7 billion euros ($8.28 billion), including roughly 3 billion euros (2.6 billion pounds) in debt.
Makers of hearing aids, whose customers are typically in their seventies or eighties, are benefiting from rising demand in ageing societies, but some are facing challenges adapting to the digital age.
Swedish private equity firm EQT will own a majority of the merged group in which the Tøpholm and Westermann families, who currently own Widex, will retain large stakes. EQT bought Sivantos from Siemens in 2015 for more than 2 billion euros.
The combined group, whose name has not been decided, will have 1.6 billion euros in sales and employ more than 10,000 people worldwide, including 800 in research and development.
The merger pushes back EQT's plans for a stock market listing of Sivantos by a few years, as the focus will now be to integrate the companies and advance its digital technology, a person close to the matter said.
Sonova has been criticised for missing an opportunity when rival GN Store introduced direct-streaming hearing aids for wireless devices in 2014, but last year closed that gap.
Sivantos and Widex also have similar technologies.
Analysts at Bernstein said that increasing R&D spend may allow Sivantos and Widex to draw ahead of peers and that the new entity may be happy to experiment with new channels and approaches to market.
"With around a third of Demant and Sonova sales coming from owned retail, this would be bad news particularly for those players," Bernstein said in a note to clients.
Shares in Sonova fell 3 percent in early trading, while William Demant and GN Store Nord also traded lower.
Sydbank analyst Morten Imsgard said Sonova, William Demant and the newly formed company would each have an around 25 percent market share, followed by GN Store (CO:GN) with 16 percent and Starkey with 9 percent.
