Siemens AG (fka SI)

[Enterprising Investor]

Osram Shares Get Bumpy Debut as Investors Offload (7/08/13)

By Eyk Henning and Isabel Gomez
Shares in Osram Licht AG (OSR.XE) fell by as much as 4% on their first day of trading Monday, following the global lighting manufacturer's spin-off from Siemens AG (SIE.XE), and the stock's turbulent launch could continue for some days as institutional investors offload shares, according to analysts.

"The current share price is just a snapshot before the share price will level within the next couple of weeks," Osram's Chief Financial Officer Klaus Patzak told Dow Jones Newswires.

Osram is the world's second-largest lighting company after Philips and has a market value of around 2.5 billion euros ($3.21 billion) and 2012 revenue of EUR5.4 billion. In 2011, Siemens pulled a planned initial offering of Osram stock due to volatile market conditions in light of Europe's intensifying sovereign-debt crisis.

Siemens is spinning-off a 80.5% stake in the company by giving its shareholders one Osram share for each 10 Siemens' ones, as it seeks to focus on more profitable business areas.

Siemens's Chief Executive Peter Loscher needs the transaction to proceed well so he can effectively demonstrate his streamlining strategy, portfolio managers said earlier.

Although a spin-off is deemed less risky than an initial public offering, bankers familiar with the transaction expect the shares to come under substantial initial selling pressure as some Siemens shareholders, including index- and special-sector funds, offload Osram shares in the first couple of days. A banker familiar with the transaction told Dow Jones Newswires it will likely take five to 10 days before the share price will level out.

Mr. Patzak said he is optimistic this exit period will be finished quickly, adding "we received good feedback from long-term oriented shareholders on the roadshow."

He also confirmed that the company's net result is likely to approach break-even this year after a net loss of EUR378.3 million in 2012.

To improve its profitability, Osram last year announced a restructuring that included shedding 8,000 of its 40,157 staff globally by 2014. It aims to achieve EUR1 billion in savings by 2015 and an 8% profit margin before interest, taxes, depreciation and amortization. "We're comfortable with this guidance and don't need economic tailwinds to achieve it," Mr. Patzak said.

Asked about currency risks, he said Osram is "largely hedged [towards currency risks] in the short term." He added the company is comfortable in the long term with current currency relations and that Osram's production sites in the U.S. and China provide a natural hedge.

Shares in the former Siemens AG unit started trading Monday at EUR24, valuing the listed portion of the company at around EUR2.51 billion. At 1302 GMT Osram shares were trading at EUR23.56, recouping earlier losses when shares fell to EUR22.99 or 4.2%.

Write to Eyk Henning at [e-mail] and Isabel Gomez at [e-mail]

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