Amplifon continues to fall, analysts cautious on GN Hearing

(Il Sole 24 Ore Radiocor) The selling on Amplifon has not stopped as the market assesses the effects of the acquisition of GN Hearing. The stock, which yesterday left 14% of its value on the ground, is the worst performing stock on the Ftse Mib. Amplifon yesterday announced the acquisition of GN Hearing for EUR 2.3 billion, marking the move from pure retailer of hearing aids to vertically integrated leader. An operation that analysts define as "complex" above all on the financial front and that arrives at a challenging time, but of which they also underline the industrial logic, even if target cuts highlight the penalisation of valuations in the short term also due to the diluting effect of the capital increase. The change of strategy passes through a transaction that, from a financial point of view, envisages a consideration that will be paid for approximately 1.69 billion in cash and 56 million in new Amplifon shares. The cash component will be entirely financed at closing through a bridge loan, which Amplifon plans to refinance over time with a combination of debt and equity, including a possible capital increase up to approximately EUR 0.75 billion. From an industrial point of view, Intermonte's analysts (outperform with a EUR 16 target) see "significant synergies mainly on the volume front and for a more diversified profile due to geographical and industrial complementarity". Among the complexity factors, from a financial point of view, analysts cite the planned capital increase. Intermonte estimates an increase in earnings per share to 2027. Analysts remain positive on the stock, but with a more cautious valuation and cut the target price to EUR 16 from EUR 19, due to the risks of chi execution, rising debt and financial uncertainty. For Akros, the valuation of the acquisition 'is not cheap' and 'implies a significant change in the business model for the group, which has always denied the possibility of upstream integration'. However, it is the group's 'first step in addressing structural changes in the industry; we therefore believe it is a necessary step in the transformation that should give the company greater control over costs and technology'. Here too, target price cut to EUR 12.50 from EUR 14, neutral confirmed. Also Mediobanca emphasises the 'clear change in strategy' that 'offers a path to reaccelerate growth in a slowing hearing aid market'. Analysts see 'significant, low-risk potential for synergies', however, 'near-term value creation is limited by the expected earnings dilution due to both the issuance of new shares to partially finance the transaction and a possible capital increase required for the cash component'. Neutral rating with target price at EUR 11.5. Equita's analysis emphasises aspects of uncertainty, expressing doubts about the operation both in the choice of moving towards a vertically integrated model "compared to what has been pursued over the past decades (in our opinion preferable for greater operational flexibility), in the timing of the operation (carried out at a time of strong share derating, thus increasing the dilutive impact) and in the risks of executing synergies". Analysts therefore cut the rating to hold with target price to EUR 11 from EUR 20.