Bang & Olufsen Investors Risk Being Short-Changed in Shaky Sale

  • Talks have narrowed to one suitor who hasn't made an offer
  • Probability of a firm bid `isn't 100 percent:' Nordea analyst

Bang & Olufsen A/S’s precarious yearlong effort to find a buyer has left the 91-year-old company with a single suitor, risking a disappointing outcome for investors who have bid up the Danish maker of high-end televisions and stereo systems.

Chinese billionaire Qi Jianhong, the largest shareholder of Chinese luxury-goods distributor Sparkle Roll Group Ltd., came out on March 22 with an expression of interest in B&O, while stopping short of announcing an actual offer. Qi may bid 85 kroner a share, Berlingske newspaper reported Wednesday, sparking a jump of as much as 12 percent in the target’s stock price.

Among the many risks for investors is the failure of B&O, known for its elegant designs and correspondingly high price points, to entice strategic buyers like Samsung Electronics Co. or TCL Corp., or even LG Electronics Inc., the South Korean company that agreed last week to make B&O branded TVs. Relying on a single individual lowers the potential for a price premium, reduces potential cost savings and increases the chances that the talks will fall through, said Patrik Setterberg, an analyst with Nordea Bank AB.

“It would have been optimal to have other bidders competing, now you’re left with one person,” Setterberg said by phone. “The chances that we’ll see a firm bid isn’t 100 percent. One man could easily change his mind.”

B&O itself has said nothing on the talks in the past 24 hours, and has issued no statement to clarify its intentions or the state of talks. A spokesman for the company declined to comment.

Qi’s involvement has already produced some confusion. Sparkle Roll clarified on Wednesday that it was Qi, not the Hong Kong-traded company itself, making the offer, through a company he owns in the British Virgin Islands. The statement he released Tuesday appeared to come from the publicly traded Sparkle Roll, in which he owns a 28 percent stake. Sparkle Roll sells Rolls-Royce and Bentley cars and luxury watches in China, along with B&O TVs, which can cost $8,000 or more.

B&O rose 5.9 percent to 72 kroner at 3:04 p.m. in Copenhagen, after reaching 76 kroner earlier. The stock has advanced about 22 percent from a Feb. 9 low of 59 kroner, though it is still well below the 85 kroner reported buyout price.

Qi, who is chairman of the British Virgin Islands-based holding company that is in talks for a bid, cautioned in his statement Tuesday that while “we love B&O,” he was negotiating to buy the company “at a price we find fair, reflecting the potential of the company but also the significant uncertainty and the investments needed to ensure further development and growth.”

B&O, worth about $2 billion a decade ago, has sought a buyer for years to help it revive its fortunes. The reported price values the company, which generated 2015 sales of about $387 million, at about $500 million.

Setterberg, who rates the stock a sell, suggests a target price of 65 kroner, 9 percent below where it currently trades.

Purchases of struggling European brands by little-known Asian acquirers haven’t always been successful. Taiwan’s BenQ Corp. bought Siemens AG’s handset unit a decade ago, and the business quickly lost ground before it was closed outright. In 2013, Royal Philips NV’s sale of its audio and video equipment division to Japan’s Funai Electric Co. collapsed amid disagreements that led to a legal spat between the two companies.

B&O gave itself an option last week with the LG deal, which will save money-losing B&O 150 million kroner ($23 million) to 200 million kroner annually when fully implemented over the next three years.

"This LG deal shows B&O still has to have a plan B in case the bid doesn’t materialize," Nordea’s Setterberg said.

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