IDG Capital Partners, MLS, and Yiwu State-Owned Assets Operation Center pay EUR 400 million for the LEDvance lamps and lighting business that had recently been carved-out from its Osram parent.
Osram has announced the EUR 400 million ($442.2 million) sale of its lamps and lighting business that recently took the name LEDvance and that has been operating as an independent company for less than a month. IDG Capital Partners is presumed to be the leader of the trio buying LEDvance that also includes the Chinese LED manufacturer and lighting company MLS Co, Ltd. (parent of US-based Forest Lighting), and financial investor Yiwu State-Owned Assets Operation Center. The deal protects the structure and employees of LEDvance and CEO Jes Munk Hansen and the management team are expected to remain in place after the close of the transaction that is expected in Osram's fiscal 2017 that begins in October.
LEDs Magazine just published an interview with Hansen in our July/August issue. In that interview, Hansen gave every indication that he planned to remain in charge, although acquisitions don’t always go as planned. But in this instance, it seems Osram took extra steps to dictate how the transition will unfold.
"The transaction is good news for LEDvance’s employees," said Michael Knuth, vice chairman of the Supervisory Board of Osram Licht AG and speaker for 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."
LEDvance and Osram will remain intertwined in many ways. LEDvance will continue to use the Sylvania brand in North America, and the Osram brand elsewhere around the globe for its lighting products. Indeed, the sale was said to be for more than EUR 400 million and Osram specifically said it would receive additional revenue from license agreements and trademark rights.
As for the trio of buyers, the largest impact will be effected on MLS. MLS is a major supplier of lighting products using the MLS brand in China. The company launched Forest Lighting to bring its products to the US and other global regions. And MLS is a top ten vendor of packaged LEDs according to our sister Strategies Unlimited analyst team, as we covered in an article on Strategies in Light presentations earlier this year. But MLS has fared far better selling LEDs into display backlights than into general lighting products.
Language in the Osram announcement about strengthening a new Osram LED plant coming online in Malaysia implies that both LEDvance and MLS will consume significant numbers of Osram packaged LEDs. Indeed, the LED supply could enable Forest Lighting to deliver higher-quality lighting products.
MLS will likely continue to use the Forest Lighting brand while LEDvance uses the Sylvania nd Osram brands alongside the LEDvance company name. But the Osram announcement said the two would develop a "co-operative worldwide footprint." The announcement noted that the operations don't overlap significantly at present.
"We are looking forward to working together," said Sun Qinghuan, chairman of MLS. "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."
The announcement also seemed to indicate that LEDvance would leverage the manufacturing supply chain that has been established by MLS in China. "The new ownership strongly supports the LEDvance strategy and will lead to a number of advantages for LEDvance and our customers," said CEO Hansen. "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."
Osram said the partners would finance the LEDvance acquisition through equity in the three organizations. The announcement stated that after the deal closes, the buying trio will be bound contractually to "certain financial restrictions concerning debt, liquidity and dividend payments at LEDvance for a period of three years." The deal ensures that "works agreements and social plans" would not change prior to 2018.