Siemens Healthineers plans two-step 7.5 billion euro capital hike for Varian acquisition: sources

MUNICH (Reuters) – Siemens Healthineers plans a two-step capital increase to raise 7.5 billion euros ($8.80 billion) via share placements to help finance its acquisition of Varian Medical Systems , sources close to the matter said on Monday.

The German health group said on Sunday it was buying U.S. peer Varian in a $16.4 billion deal that seeks to create the global leader in cancer care solutions.

Varian shares rose 22% in early trading on Monday, while Healthineers’ shares were down 6.7% at 41.00 euros each on concerns that Healthineers was paying a steep price.

Healthineers said on Sunday that it would pay $177.50 each for Varian shares, a 24% premium to the shares’ closing price on Friday.

Shares in parent company Siemens, however, rose 3.7% on Monday to 112.28 euros.

Healthineers said it plans to raise roughly 7.5 billion euros in equity to finance the deal, with the remainder coming from debt that parent Siemens will provide.

To avoid raising the money through a rights issue, Healthineers plans to place up to 10% of shares on the market using its authorised capital later this year. The company will seek shareholder approval for a similar transaction next year, the sources said.

Siemens’ stake in Healthineers will be diluted to about 72% from 85% following the share sale.

The debt part of the transaction will be provided by parent Siemens , given that it is expected to get better terms than newcomer Healthineers, spun out of Siemens in 2018.

By buying Varian, Healthineers is acquiring the leader in radiation therapy with a market share of over 50%. In case the deal falls through, Siemens will have to pay a $450 million break fee.

(Reporting by Joern Poltz and Arno Schuetze; Editing by Sabine Wollrab, Thomas Seythal and Susan Fenton)