Osram's Sale of Ledvance Anticipated to Receive Green Light from German Government by 2Q17

Osram is close to receiving approval from the German government to go ahead with the sales of its general lighting business LEDVANCE to a Chinese investment consortium headed by IDG Capital Partners (IDG), reported DrivingVisionNews.com.

The German Economic Ministry abruptly halted IDG and lighting partner MLS acquisition of LEDVANCE in late October 2016, just days after German MOCVD manufacturer Aixtron’s deal was called off over U.S. national security concerns.

Last July, IDG and its lighting partner MLS proposed to acquire LEDVANCE for EUR 400 million (US $439.58 million).

Dr. Olaf Berlien, CEO OSRAM Licht AG, Antony Yu, Partner IDG, Sun Qinghuan, Chairman MLS, Jes Munk Hansen, CEO Ledvance. (Osram/LEDinside)

Yiwu State-owned Assets Operation Center and MLS will each hold a 36% stake and IDG Capital Partners will own 28% stake in LEDVANCE following the completed transaction.

The terms of the acquisition requires MLS to prioritize the procurement of LED chips from Osram’s newly constructed LED chip fab in Malaysia, moreover, the German lighting company is to receive additional payments from licensing trademark rights for a period of 10-years. Based on the agreement with Osram, Ledvance will continue using Osram and Sylvania’s brand names at the product level, while intellectual property rights will be clearly separated.

Initially, the German government was hesitant about Osram going forward with the deal due to concerns of technologies outflowing to MLS. Yet, since the acquisition deal mostly involves LEDVANCE’s global marketing assets, such as LED bulb distribution networks and does not involve sensitive technologies, the German government is projected to approve the deal.

Sources from MLS and Osram confirmed the German government would grant clearance by second quarter of 2017.

IDG’s takeover of Ledvance is estimated to end on a positive note in 2017, while Aixtron and other German technology companies have been less fortunate. The industry is increasingly aware of German government’s stricter control on foreign investments.

Cross-sector review is currently mandatory for foreign investors that are not a resident of the EU or from a member state in the European Free Trade Association, who directly or indirectly acquires a 25% share in a German company. If the German Ministry decides to prohibit the deal, it requires the approval from all federal ministers of the cabinet, reported legal experts Lexology.

Lexology estimated the legal basis of the German foreign investment review procedure will become increasingly more rigid, which could leave a negative impact on M&A transaction deals. Lexology recommended foreign investors interested in German companies to be aware of these changes during the early stages of the M&A talks, and gain more insights into the new implications of the German foreign investment review procedure. Clearance applications are expected to become more cumbersome in the near future, which investors need to be more prepared to complete.

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