In its meeting on Tuesday, July 26, the Supervisory Board of OSRAM Licht AG (Osram) approved the sale of the general lighting lamps business. The buyer of the business known as Ledvance is a Chinese consortium consisting of the strategic investor IDG Capital Partners (IDG), the Chinese lighting company MLS Co., Ltd. (MLS) and the financial investor Yiwu State-Owned Assets Operation Center (Yiwu). The purchase price amounts to nearly $440 million. Osram will additionally receive payments for license agreements of trademark rights. The consortium and Ledvance are a very good fit due to their complementary structure both geographically as well as respective product portfolios and they have solid financial resources. Through the transaction, both would respectively benefit from a significantly larger sales and distribution network, as well as sourcing synergies, which would lay the foundation for co-operative future growth. The transaction is subject to certain closing conditions, regulatory approval by the relevant authorities. The transaction is expected to close in the course of fiscal 2017.
Osram has found a new owner for its lamps business, the Chinese consortium, with IDG as a long-established strategic investor with substantial expertise in operation outside China and experience in industrial technology, and MLS as one of the leading companies in the area of LED-based products for consumers in China. Benefitting from Ledvance’s decades of experience, MLS will be able to significantly expand its position in the global lighting market through the transaction. Ledvance in return will gain improved access to the Chinese growth market as a result of this transaction. Based on an agreement with Osram, Ledvance will continue to use the Osram and Sylvania brand names at the product level. Intellectual property rights are clearly allocated so that the consortium and Ledvance can continue to drive global innovations and product development.
“The transaction is a milestone in Osram’s alignment towards a high-tech player in the lighting industry,” said Olaf Berlien, Chief Executive Officer of OSRAM Licht AG. “We sought and have found the best owner for Ledvance. Within the consortium, MLS is a growth-oriented lighting company with unique expertise and a strong position in the important Chinese market.”
Through the transaction, Ledvance is able to develop a co-operative worldwide footprint with MLS. Ledvance’s products and those of MLS target different users in different territories in emerging and developed markets. “We are looking forward to working together. The qualifications and wealth of experience of the management team and employees of Ledvance represent two key factors for Ledvance’s success in the cooperation with MLS in the future,” said Sun Qinghuan, Chairman of MLS. “Backed by strong financial resources, we are committed to sustainable development and the goal of further strengthening the market position of the cooperative network as one of the leaders in the global lighting market,” adds Antony Yu, Partner at IDG.
“The new ownership strongly supports the Ledvance strategy and will lead to a number of advantages for Ledvance and our customers. We will gain access to a more cost efficient supply chain for LED Lamps and luminaires and can continue to uphold our quality standards. Furthermore, we will strengthen our sales opportunities in Asia and especially in China,” said Jes Munk Hansen, CEO of Ledvance. Jes Munk Hansen and the management team of Ledvance will remain in place following the closing of the transaction.
Works agreements and social plans remain in place
The transaction is focused on growth and will not induce additional personnel measures due to a limited overlap in organizational structures between the involved companies. The agreements and principles safeguarding the future that Osram and the employee representatives agreed upon remain in place. Consequently, works agreements and social plans will not be changed until the end of 2018. The entire collective agreement and dismissal protection for the German workforce are preserved.
“The transaction is good news for Ledvance’s employees,” said Michael Knuth, Vice Chairman of the Supervisory Board of OSRAM Licht AG and Speaker of the IG Metall trade union in the German state of Bavaria. “The consortium will uphold the existing agreements with the works council and IG Metall. Ledvance’s global headquarters will remain in Garching, Germany. The company will therefore remain an entity under the principles of German codetermination. The consortium consists of reliable and conscientious entrepreneurs. During our negotiations, the involved companies have furthermore shown great respect for the accomplishments and experience of the Ledvance team.”
Financing
Fully guaranteed financing for this transaction is in place. The consortium will finance the purchase price on an all equity-financed basis. After closing of the transaction, the consortium is contractually bound to certain financial restrictions concerning debt, liquidity and dividend payments at Ledvance for a period of three years.
Strategic supply agreement strengthens LED chip plant in Malaysia
With its three-pillar strategy announced last November, Osram will strive for sustainable growth in technologically sophisticated markets. Based on the company’s extensive product and patent portfolio, excellent global growth opportunities emerge in particular for Osram’s business with opto-semiconductors (LED). This growth will be strengthened with the new production plant in Malaysia. In connection with the transaction, Osram and MLS entered into a strategic supply agreement, by which MLS intends to purchase an annual order of LED chips from the new plant in Kulim, Malaysia, once production has started.
Please find further material regarding this topic here.
Tagged with acquisition, LEDVANCE, Osram, tED