Osram Licht AG (OSRD)

[Enterprising Investor]

Osram Soars on Report Sanan Optoelectronics Is Preparing Bid (10/06/16)

by Richard Weiss

Chinese company plans EU70 per share offer: WirtschaftsWoche

Offer would value lighting parts maker at 7.3 billion euros

Osram Licht AG shares soared to a record after a report that Sanan Optoelectronics Co. Ltd. may make a 7.3 billion-euros ($8.2 billion) offer for the maker of lighting products, the latest bid by a Chinese company for a German industrial business.

The stock rose as much as 14 percent to 61.75 euros in Frankfurt, the most since the Munich-based company was spun off by Siemens AG three years ago. Sanan, a Jingzhou, China-based manufacturer of wafers for light-emitting diodes, is preparing to offer about 70 euros a share, German business news magazine WirtschaftsWoche reported on Thursday, citing people close to the negotiations.

Osram spokesman Philipp Grontzki declined to comment. Kan Hongzhu, secretary of the board of Sanan couldn’t be immediately reached by phone and e-mail on the Chinese holiday.

“For Sanan, Osram is a highly attractive asset that would add quality and access to customers in Europe,” said Karsten Iltgen, an analyst at Bankhaus Lampe in Dusseldorf, who recommends clients buy Osram shares. “Even though the company is smaller and less profitable than Osram, they may well be able to finance such a transaction with the help of the Chinese government.”

Chinese companies have announced or completed acquisitions of German companies worth a record 11.3 billion euros so far this year, almost eight times as much as in 2015, according to data compiled by Bloomberg. The tally includes the purchase of a stake in robot-maker Kuka AG by Midea Group Co., a deal that was scrutinized by German lawmakers concerned about the loss of technological know how, including Economy Minister Sigmar Gabriel.

“The European Union must take a clear stance on China and cannot duck away from this,” Gabriel said on Thursday at an event in Berlin, reiterating government comments related to Osram made last week.

Osram shares traded 10 percent higher at 59.89 euros at 1:22 p.m. local time.

A group of Chinese investors agreed in May to buy Aixtron SE, a German supplier of semiconductor equipment, for about 670 million euros. Shares in that company had crashed late last year after client Sanan Optoelectronics canceled orders, citing a failure to meet “specific qualification requirements.” The suitors said on Thursday that almost 25 percent of Aixtron stock had been tendered. The offer period expires Oct. 7.

Sanan is behind the latest offer for Aixtron, according to a note at the time by NSBO, a London and Bejing-based investment bank which focuses on China.

Siemens, which still owns 17 percent of Osram shares, is considering offloading its remaining stake to potential buyers including Chinese investor GSR GO Scale Capital, people familiar with the talks said last month. Osram in July said it will sell its general lamps unit Ledvance to a Chinese consortium for 400 million euros to focus on its semiconductor, automotive lighting and services businesses.

“This is a political issue,” Bankhaus Lampe’s Iltgen said. “It is also questionable if Siemens is really willing to sell its remaining stake to a Chinese company given the repercussions against Siemens that may follow.”

Sanan’s first-half sales rose to 2.78 billion yuan ($416 million) from 2.29 billion yuan the previous year, the company said Aug. 23. The company is valued at 49 billion yuan.

http://www.bloomberg.com/news/articles/2016-10-06/osram-soars-on-report-sanan-optoelectronics-is-preparing-offer