Sale of Resound to Sonova Terminated

The agreement for Sonova to purchase ReSound has been officially terminated. If it had been successful, it would have made Sonova the largest hearing aid maker in the world.

Even though the sale had been approved in all other markets world wide, the agreement came undone when the German Federal Cartel Office or Bundeskartellamt concluded that the DKK 15.5 billion deal would create "collective market dominance" in the German hearing aid industry, dominated by the big three: Siemens, Sonova and Oticon.

Together, these three industry leaders control 80% of the German market for hearing devices. With ReSound controlling 8% market share, the Bundeskartellamt felt that the acquisition of Resound would consolidate too much control within the hearing device design and manufacturing sectors of the economy, and quashed the deal.

Resound and Phonak both appealed the authority's decision but on August 8, 2007, the German court denied the appeal request, sending the case back to the Bundeskartellamt, which had already posted its ruling.

Sonova announced the official termination of the USD 2.8 billion deal on August 15th, 2007, and implemented a share buy-back program of up to 10 percent of its share capital over the next three years. Company leaders did not think that the buy-back program will impact the overall financial flexibility of the company due to the solid financial position of Sonova.

Various options for Resound have been put forth by GN Chairman Mogens Hugo. This includes the sale of Resound to another company or dividing GN into two independent listed companies, one for headsets (GN is a world leader in headsets) and one for hearing aids. GN is open to any other possibilities as well. Hugo has set a goal of getting a new plan in place by Christmas 2007.