Seeing China's lighting industry overseas mergers and acquisitions from Mulinsen

Osram's light source/lighting business has finally come to the woods. Yesterday, the consortium of China's LED packaging leader Mlinsen (MLS), Yiwu State-owned Assets Operation Center and IDG Capital and the world's lighting giant OSRAM officially signed a merger for the acquisition of the latter's light source/lighting business for 400 million euros. protocol.

Since the end of last year, Chinese companies and capital have launched three large-scale mergers and acquisitions for overseas lighting companies. The other two are Jinshajiang Venture Capital led the Chinese-funded consortium to acquire a 80.1% stake in Philips' Lumileds for $3.3 billion (due to regulatory failure) Failure); Shanghai Feile Audio acquired an 80% stake in Havells Xiwannian for 150 million euros. Once upon a time, the four giants of Philips, Osram, GE and Xiwannian once monopolized 70% of the global lighting industry. Now, with the advent of the LED era and the rise of China's lighting industry, they have begun internal integration and divested the thin business. Establish a new strategic direction.

Osram has no choice but to sell a hundred years of foundation

Osram, the world's second-largest lighting manufacturer, had exposed its Lamps business last year. In order to make the sale smoother, OSRAM even gave the business an elegant name - Ledvance. The name consists of two words: LED and Advance (translated to lead), which means "leading LED company." However, the opposite is true. This business is already the relatively "least leading" business of OSRAM. In addition to the LED light source products, it also covers the traditional light source business, which is the so-called previous generation of light sources - incandescent lamps, fluorescent lamps and Gas discharge lamp.

In terms of technology and replacement cost, LED can not completely replace the previous generations of light sources, so the market of the previous generation of light sources is shrinking, but it is unlikely to disappear in the short term; while the LED light source business is in line with the trend, but because of Asia, especially Chinese LED manufacturers have swarmed and profit margins have been compressed very low. Therefore, Lamps, a shrinking and small-profit business, has become the object of OSRAM's choice of divestiture. Even this business has made Osram more than 100 years of glory.

In recent years, Osram's life has not been better, and the decline in profit margins has led to the divestiture of its original parent company, Siemens, in 2013, leaving only 17% of the shares. At the end of last year, the major shareholder Siemens publicly accused OSRAM's management of investing 1 billion euros in the construction of a chip base in Malaysia without notice. As a result, Osram's share price plummeted, causing it to lose about 300 million euros. In April this year, it was revealed that Apple chose Philips to replace the original OSRAM as its LED supplier...

In 2014, Osram "squatting hands" offered a large restructuring plan for OSRAM PUSH. In addition to divesting the Lamps business, it is also necessary to optimize costs, shut down a large number of factories, and lay off 7,800 jobs by 2017. Osram’s strike at Foshan’s factory was once raging, and various restructuring costs continued to suppress the company’s profits. Earlier efforts to tap the Lamps business will also ease the pressure on cash flow.

From a financial perspective, Lamps' revenue in 2015 was as high as 2 billion euros, accounting for 40% of OSRAM's total revenue, but growth has slowed significantly, up only 0.7% from 2014; EBITA (tax interest and amortization) for this business The former profit) was a loss of 42.1 million euros. The report said that it was mainly due to internal factory closures and layoffs. In 2014, this figure was positive at 23.5 million euros. Therefore, from a profit perspective, the Lamps business is indeed weak, but this is the status quo of the entire industry, otherwise Osram will not sell.

Why is Osram not married?

As the saying goes, the dead camel is bigger than the horse, and the revenue of 2 billion euros is put into the Chinese lighting industry is a giant. Osram's brand premium and global channels are by no means a fame. As a result, the news of the sale of the Lamps business has attracted strong interest from Chinese buyers, including China's old lighting companies: Dehao Runda, Feile Audio, Foshan Lighting and so on.

Regarding the intention to acquire Osram, Mulinsen was the latest to announce, but it was better to come as soon as possible. Osram saw Mlinsen at a glance. Founded in 1997, Mulinsen focuses on the LED packaging business and has miraculously leapt to the leading LED packaging industry in China in the past few years with its determined cost strategy. When the packaging business was basically saturated, Mulinsen began to extend down to the light source/lighting business and had its own brand. At present, Mulinsen's packaging business still accounts for about 80% of its total business. Therefore, for Mulinsen, Osram's Lamps business fits well with its needs. This business not only makes its light source business scale to the top three in the world, but also makes Osram's sales channels in 150 countries around the world, which has created a shortcut for the global promotion of Mulinsen's own brand.

But on the other side of the deal, Osram's sale of the Lamps business is clearly not just for money, but for a future ally. Despite the sale of the Lamps business, OSRAM retained Opto Semiconductor, a high-tech, high-margin upstream chip and packaging business. That is to say, Osram was originally a full-chain industry and now sells downstream to Mulinsen. The advantage of the whole industry chain is that the links are strong and the solutions are perfect. However, OSRAM, which has divested its downstream business, obviously does not want this to affect its business capabilities. It even hopes that the acquirer can play a role in the overall industrial chain. Better efficiency.

Therefore, OSRAM will consider Chinese companies with no conflicting business and mature manufacturing capacity and low cost. Dehao Runda has its own chip business unit, which obviously constitutes a certain conflict of interest. Mulinsen's dominant strength in packaging seems to conflict with OSRAM's packaging business in this case, but in fact OSRAM is more focused on the upstream chip business with higher technical barriers. The mid-stream packaging business is outsourced to Mulinsen, which is highly efficient and low. The cost of the manufacturer is completely deductible, therefore, Mulinsen's packaging business has actually become a plus item. In this way, pure downstream manufacturers such as Feile Audio and Foshan Lighting will not cause obvious conflicts of interest, but they are undoubtedly inferior in synergy.

In the end, Mulinsen can be said to have won the deal without suspense. With 400 million euros in exchange for a business of 2 billion euros, plus global channels and a global technology-leading upstream ally, the Mulinsen deal is well worth it. In addition to 400 million euros, other terms include: Mulinsen will pay a brand license fee between 1 million and 2 million euros in the next 10 years; Mulinsen promises to operate after Osram's new plant in Malaysia Order of 100 million euros; Mulinsen promised not to change the labor contract and social security plan of Ledvance existing workers by the end of 2018.

China's lighting industry breakthrough needs to rely on itself

Looking back at the case of Jinshajiang Venture Capital, which caused a sensation in the LED and semiconductor industry at the beginning of this year, to acquire Philips' Lumileds case, the price of 400 million euros for Mulberry's acquisition of Osram Lamps business is obviously a lot worse. The two targets have close annual revenues. But why is the price gap so large for the acquisition of the world's top lighting companies? The answer is patents. And it is precisely because of the patent that Jinshajiang Venture Capital eventually lost the heavy transaction due to the failure of the US regulatory agency CFIUS approval.

For many years, the world's top LED chip manufacturers such as Philips, Osram, Corey, and Nichia have protected their respective technological advantages through cross-patent authorization. China's LED manufacturers still have gaps with these manufacturers, and even high-demand chips still need to be imported. The high-margin upstream part is monopolized by developed countries. In the transaction between Jinshajiang Venture Capital and Lumileds, there are more than 600 patent transfers, and the successful acquisition will bring great help to China's LED and semiconductor technology. It’s just that the US government will not give China such an opportunity. Mulinsen also considered the development of the upstream chip industry, and a small number of shares in Taiwan's Jingyuan Optoelectronics, but semiconductor technology is also strictly protected by Taiwan, unable to acquire.

Therefore, it can be said that the best result of overseas mergers and acquisitions of China's lighting industry at this stage may be the case of Mulinsen's acquisition of Osram's light source. At the beginning of this year, Havel's acquisition of Havel Sound was also a downstream manufacturer of lighting, and it was only a channel and no technical patent. It is worth mentioning that OSRAM SYLVANIA, a subsidiary of Osram, was a family with Havells more than 20 years ago. In 1993, the Xiwannian business in North America was acquired by Osram, and the remainder was acquired by the Indian investment company Havells in 2007. After the spin-off, Xi Wannian, who used to be a giant, naturally missed the development period of LED chips and could only engage in downstream light source business.

After the failure of Jinshajiang Venture Capital to acquire Lumileds, perhaps the way the Chinese lighting industry acquires technology patents through overseas mergers and acquisitions is nowhere to go. The key to breaking through the patent blockade of overseas giants is itself. Domestic chip technology manufacturers led by Sanan Optoelectronics are also increasing their R&D investment to catch up. At present, some technologies have reached the international leading level. At present, in the downstream lighting, light source, and lighting panels, the inevitable blood war has begun. Only a technical upgrade can truly let Chinese lighting companies go out. When Chinese companies can acquire leading chip companies overseas, that is, when Chinese technology reaches the world's leading level.

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