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Sonova to buy Advanced Bionics for $489 million

November 10, 2009|Tiffany Hsu

Swiss hearing aid company Sonova Holding is buying Valencia-based Advanced Bionics Corp., which makes surgical cochlear implants, for $489 million.

The transaction, if approved by regulators, should be completed within three months and would cost Sonova about $506 million. The deal announced Monday is being financed with cash and debt.

Advanced Bionics Chief Executive Jeff Greiner said the company, which had $117 million in revenue in 2008, would remain an independent business unit within Sonova and would not be restructured. "It's a standard acquisition, part of a very deliberate, thoughtful strategic plan in which we fit perfectly," he said. "These guys can make us better."

Sonova hopes that its technology and distribution networks and financial clout will double Advanced Bionics' sales in the next three to five years.

Founded in 1993 by billionaire biotech investor Alfred E. Mann, who also launched Valencia pharmaceutical company Mannkind Corp., Advanced Bionics has an 18% share in the global cochlear implant market and sells in more than 30 countries.

The company's devices are implanted in the inner ear and rely on processors, transmitters and electrodes that translate sounds into electrical signals for those with hearing loss.

The tiny pacemaker-like devices and accompanying system cost roughly $25,000 each.

Greiner said he would stay on as chief executive. Mann, who is chairman of the board and "the spiritual and cultural head of the company," may hold an advisory role but will probably not be an active participant once Sonova takes over, he said.

Known as Phonak Holding until 2007, Sonova does business in more than 90 countries and has more than 5,300 employees as well as its own manufacturing facilities, wholesale network, independent distributors and stores.

"With this transaction, Sonova adds a new source of sustainable business growth and enhances its position as the leading provider of hearing healthcare solutions, said Chief Executive Valentin Chapero.

But Sonova has struggled with acquisition attempts. In 2007, the German Federal Cartel Office blocked Sonova's purchase of ReSound Group, a Denmark-based hearing aid company. At the time, the deal was worth 3.3 billion Swiss francs, or $2.7 billion.

Advanced Bionics has also had a tortured history with acquisitions. In 2004, it was bought for $740 million by Boston Scientific Corp., a medical device business based in Natick, Mass., with more than $3 billion in potential future progress payments.

But the companies ended up battling for control in federal court before agreeing to unwind the original deal.

Boston Scientific made payments to the Advanced Bionics management team of $650 million in 2008 and $500 million in 2009. Of that, Advanced Bionics used $150 million to buy back its auditory and drug pump development programs, leaving Boston Scientific with spinal cord stimulation and other emerging technologies.

Greiner said the match with Sonova should be stronger.

"After going through a brutal divorce, of course there was concern about getting married again after two years," he said. "We may be jumping into the frying pan again, but we spent six months in intense discussions so we could get to know one another better."

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tiffany.hsu@latimes.com

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