Siemens AG (fka SI)

[Enterprising Investor]

Osram may start lighting M&A’s after Siemens spin-off (3/29/11)

Lighting group Osram will pursue takeovers and alliances once it is spun out of German conglomerate Siemens in an initial public offering (IPO) late this year.

Osram, the world’s No. 2 player in the 40-45 billion euros ($56-64 billion) lighting market after Philips, will be listed as part of a revamp of Siemens, Europe’s biggest engineering company.

“There will be a lot of opportunities for collaboration with other companies,” Siemens Chief Executive Peter Loescher told Reuters Insider television. Spinning off Osram – the only unit within the conglomerate which does not carry the Siemens brand – will free up capital and allow Siemens to tap into a growing green energy market, Loescher said.

The fixture market in Europe is extremely fragmented. An analyst said he expects Osram to target more lighting and fixtures companies in Europe, where many players are only active in parts of the market or a limited number of countries.

Osram, estimated to be worth 5-7 billion euros, ranks above General Electric and competes with Panasonic and CREE.

Siemens plans to sell off just over 50 percent of Osram, chief financial officer Joe Kaeser said. It is looking to complete the flotation in the latter part of 2011 and will remain a major long-term shareholder.

Osram will have a solid supply of capital and is looking at a credit rating of A minus or BBB plus, Siemens said.

The Osram flotation is part of a larger overhaul of Siemens under which it will create a fourth division, “infrastructure and cities”, alongside existing energy, industry, and healthcare units.