Chinese financial institutes: Osram's Lighting Business Average Worth About EUR 720M

Quotes/ Perspectives from LEDinside: 
“It is unlikely Osram will be selling the two business units separately, since the two lighting businesses share the same distribution channels,” said Roger Chu, Research Director of LEDinside. “By acquiring Osram’s lighting business, Chinese manufacturers will be able to expand their international sales channels.”

The word was out last Friday that Osram is in the process of selling its lamp business, which comprises traditional lighting businesses and LED luminaires, with Chinese manufacturers showing the greatest interest in bidding for the German company’s prized luminaire businesses.

Financial institutes in China estimated the total value for Osram’s Classical Lamps and Ballast (CLB) and its LED Lighting Solution (LLS) business varied widely, with the estimated mean for the two business combined at EUR 720 million (US $775.4 million), according to LEDinside’s sources.

The Osram Lighthouse is the lighting company's global headquarters. (Photo courtesy of Osram)

 “It is unlikely Osram will be selling the two business units separately, since the two lighting businesses share the same distribution channels,” said Roger Chu, Research Director of LEDinside. “By acquiring Osram’s lighting business, Chinese manufacturers will be able to expand their international sales channels.”

The business transaction value is much lower than Lumileds but the nature of Osram’s lighting business spin off is very different. Lumileds separation as an independent entity mostly covered LED products in the upstream market including LED chips, package, and components. Furthermore, it potentially involved the transaction of valuable LED patents, and other technology know-how that Chinese companies are still lagging behind.

In contrast, Osram is selling its lamp business, which is the end product in the industry, and a market where Chinese companies are quickly catching up. Intense price wars from Chinese manufacturers have driven down luminaire prices down in recent years, and on top of this the rise of LEDs and other more energy efficient light sources including CFLs, have impacted traditional luminaire sales. Osram’s traditional lighting unit, CLB, sales fell 15% in fiscal year 2014 to EUR 1.96 billion, while its margin on EBITDA was a mere 4.6%.

Chu noted more international manufacturers will be spinning off their less profitable lighting businesses in the future, which will mostly be acquired by large Chinese companies.

Numerous Chinese LED manufacturers have shown interest in acquiring Osram’s lighting businesses, including MLS and Felio Acoustics which have been most vocal about their decision. There will probably be more players submitting proposals, but they will need to receive the green light from the Chinese government. All Chinese bidders will need to seek government approval before they can acquire foreign assets, said industry insiders.

(Author: Judy Lin, Chief Editor, LEDinside)

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