On the face of it, Siemens and Bayer are pursuing contradictory strategies.

Siemens’ €4.2bn acquisition of Bayer Diagnostics is the latest expansion of its medical division. The Bayer unit is complementary; following its purchase of Diagnostics Products Corp in April, Siemens will have leading positions in both laboratory diagnostics and its traditional imaging businesses.

Does this mean that Bayer was wrong to sell its hospital diagnostics business, while keeping hold of its Diabetes Care Division and Schering’s diagnostic imaging business, which will form “an important part of the future Bayer Schering Pharma AG”?

Others’ attempts to consolidate might suggest so. In fact, Bayer has got rid of the parts of its diagnostics business that require lots of hardware and equipment servicing – never an area of strength. It has also extracted a good price for the business, at around 3 times 2005 sales. At an enterprise value of an estimated 27 times earnings before interest and tax, Siemens should be able to extract higher margins from the business.

Like Siemens, Bayer has been re-shaping itself. But even after this disposal, and the acquisition of Schering, Bayer is still a candidate for future surgery. Its combination of healthcare and crop sciences business is not entirely convincing. However, after two big deals – the second neatly helping to finance the first – and the extension of the chief executive’s contract by three years to 2010, a rapid spin-off seems unlikely.

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