Cochlear announced on Friday that it had acquired Entific, which makes implantable hearing devices for people who are deaf in one ear, from Nobel Biocare Holding.

Cochlear said the acquisition would add 5 per cent to cash earnings per share (EPS) in 2006.

The company also confirmed its full- year guidance for fiscal 2005 of a core profit after tax of $53 million to $55 million, before an Entific goodwill charge of $3 million to $4 million.

"This is quite a nice little bolt-on acquisition for us - it's sort of an extra maybe 15 per cent kicker in revenues," Cochlear chief executive Chris Roberts said.

Dr Roberts said that although the acquisition would be immediately accretive to EPS, Cochlear was not changing its financial guidance for this half because there would be some start-up costs.

Dr Roberts said Entific's products did not compete with Cochlear's devices because they covered a different type of hearing loss.

"It is cash earnings per share accretive before we get synergies ... and we do anticipate synergies because the customer base, the distribution are very, very similar ... and as well as some technology synergies," he said.

"The acquisition of an implantable hearing device company strategically expands Cochlear's reach in treating people with a significant hearing loss and where a traditional hearing aid just doesn't work."

Dr Roberts said Cochlear expected to close the deal this month. The acquisition would be funded through existing cash of about $40 million, and debt of $155 million.

Entific, which has an enterprise value of about $175 million, has treated more than 25,000 patients with its Baha hearing implant system.

The titanium bone-anchored hearing implant is used in the treatment of conductive hearing loss and people who are deaf in one ear.

The implant consists of a small titanium screw surgically placed in the skull to the rear of the ear, onto which is clipped a small removable sound processor.

Entific booked revenue of $40 million in the 12 months to December, selling about 6300 units.

Dr Roberts said although the number of Entific units sold was about half the volume of Cochlear implants sold, Entific had the potential to overtake Cochlear in terms of unit sales.

Fifty-eight per cent of Entifica's sales were in Europe, but North America was the fastest growing market, accounting for 38 per cent of revenues last year.

Entific has posted compound annual revenue growth in excess of 35 per cent over the last five years.

Although the future growth rate was forecast to be lower than this, it was well ahead of Cochlear's long-term average growth rate.

Dr Roberts said Entific had gross margins of 80 to 85 per cent. It was too early to quantify the potential synergies.

Cochlear shares rose $1.01, or 3.39 per cent, to $30.80 in early afternoon trade on Friday.

From FinancialReview