Sonova Announces the Acquisition of Advanced Bionics

November 2009

Editor: WOW! I think this is a monumental development in the hearing loss world! Sonova (which owns Phonak and several other hearing-related companies) has announced the acquisition of Advanced Bionics, one of the major suppliers of cochlear implants (CIs). So what happens when one company controls one of the largest hearing aid manufacturers and one of the largest CI manufacturers? I guess we'll find out!

Here's the press release.

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Sonova Holding AG (SIX:SOON), the world's leading provider of hearing systems, announced today that it has entered into a share purchase agreement with the shareholders of Advanced Bionics Corporation, Los Angeles, USA. Advanced Bionics is a global leader in developing and manufacturing cochlear implant systems. The purchase consideration of USD 489 million will be fully paid in cash. Subject to regulatory approvals, the transaction is expected to close within the coming three months.

Highlights of the transaction:

* Sonova becomes the first global hearing healthcare company with a strong worldwide presence in hearing instruments and cochlear implant systems

* Sonova enters into the high growth market of cochlear implant systems with expected market growth rates of 10-15% p.a.

* Sonova's strong commitment to innovation will boost Advanced Bionics' position as an innovation leader in the cochlear implant industry

* The Sonova Group targets to improve the performance of Advanced Bionics, doubling sales and increasing EBITA margin to 20% or beyond within the coming three to five years

* With all cash consideration of USD 489 million plus transaction costs of CHF 10 million totaling CHF 510 million at current exchange rates, the transaction is expected to be accretive to earnings per share (EPS) before transaction-related amortization in the second full year after closing

Sonova - the hearing healthcare company

The acquisition represents a strategic expansion into the area of cochlear implants for the Sonova Group, leveraging the Group's leading position as a global provider of hearing systems.

"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 Valentin Chapero, CEO of the Sonova Group. "With all its brands Sonova will offer the most comprehensive and innovative product and service portfolio covering any customer need for most types of hearing problems."

Advanced Bionics will remain an independent business unit within the Group but will share all the integral elements that have been driving the success of Sonova over the last decade: Global sales coverage, outstanding service orientation, world class supply chain, a high innovation rate and a strong implementation culture.

Advanced Bionics - a leading company in cochlear implant systems

Advanced Bionics is one of the global leaders in the development, manufacturing and distribution of cochlear implant systems with revenues of USD 117 million in 2008. Founded in 1993 and backed by renowned innovator Al Mann, the company is present in over 30 countries and has become the global number two with an estimated share of approximately 18% of the cochlear implant market. Cochlear implants are surgically implanted devices that restore hearing for people with profound hearing loss. A cochlear implant system consists of an external processor that captures and converts sound into detailed digital information, a magnetic headpiece that sends the signal to the implant, and an electrode, implanted directly in the cochlea, that delivers electrical signals to the hearing nerve. The hearing nerve sends impulses to the brain, where they are interpreted as sound.

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Significant value creation

Sonova shareholders are expected to benefit from value creation through a combination of accelerated growth and financial improvements at Advanced Bionics. Sonova aims to significantly increase Advanced Bionics' market share in this high growth market.

Advanced Bionics will benefit from Sonova's high-performance hard- and software platforms and the Group's existing technologies that are complementary to the cochlear implant industry. This transaction will enable significant innovation by applying state-of-the-art acoustics and mechanical engineering know-how, implementing advanced audiological algorithms and simplifying the fitting process. The combination of Advanced Bionics' superior nerve stimulation approach and Sonova's thorough understanding of the acoustical challenges of profound hearing loss will result in highly innovative products that deliver the best possible hearing for cochlear implant patients.

In addition to the product and technology related benefits, Advanced Bionics will be supported by the global sales organization of Sonova achieving a significant enhancement of its international distribution and service capabilities. Patients, customers and partners of Advanced Bionics will not only benefit from the improved product features and the expanded global presence, but also from the stability and continuous innovation that Advanced Bionics will enjoy as part of the Sonova family.

Together with Sonova's operational management capabilities, there is significant potential to improve the financial performance of Advanced Bionics and to assure its long-term success. Sonova aims to double the revenue of Advanced Bionics within the next three to five years and to increase its EBITA margin to 20% or beyond.

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Disclaimer

This Media Release may contain forward-looking statements which offer no guarantee with regard to future performance. These statements are made on the basis of management's views and assumptions regarding future events and business performance at the time the statements are made. They are subject to risks and uncertainties including, but not confined to, future global economic conditions, exchange rates, legal provisions, market conditions, activities by competitors and other factors outside the company's control.

This is Sonova

Sonova is the leading provider of innovative hearing healthcare solutions. The globally active group is the world's top manufacturer of hearing systems, the market leader in wireless communication systems for audiology applications and a provider of professional solutions for hearing protection. Sonova is pursuing a clear growth strategy and is intent on building its market share. To this end it is constantly expanding its existing business segments and branching out into other areas of the hearing healthcare industry.

Present in over 90 countries, and with a workforce of over 5,300 employees, Sonova generated sales of CHF 1.249 billion in the financial year 2008/09 and a net profit of CHF 284 million. This financially strong group of companies bases its success on innovation, customer focus and proactive cost management.

The company has been successfully promoting understanding and communication for over 60 years, and is ideally positioned to benefit from the trends in this growth industry.

For more information please visit www.sonova.com.

Sonova shares (ticker symbol: SOON) have been listed on the SIX Swiss Exchange since 1994.

About Advanced Bionics

Advanced Bionics Corporation is a global leader in developing the most advanced cochlear implant systems in the world. Founded in 1993 and headquartered in Valencia, Calif., AB is the only American company developing cutting-edge cochlear implant technology that restores hearing to the deaf and allows recipients to hear their best today, tomorrow, and always.

AB has the most sophisticated cochlear implant system on the market, the Harmony(r) HiResolution(r) Bionic Ear System, with five times more sound resolution than its competitors, designed to allow recipients to go beyond deciphering simple speech to hearing music. With sales in over 30 countries and a proven track record for developing high-performing, state-of-the-art products, AB's talented group of over 600 technologists and professionals from all over the world are driven to succeed, work with integrity and stay firmly committed to quality.