Osram Shares Slump After Lamps Unit Sale Price Disappoints

  • Sale to Chinese for 400m euros ‘on low side’: Morgan Stanley
  • CEO says deal price will be enhanced by license payments

Osram Licht AG shares declined on disappointment with the 400 million euros ($440 million) sale price of its general lamps unit and a slump in third-quarter profit partly caused by costs related to the deal.

The stock fell 6.8 percent by 11:39 a.m. in Frankfurt, the steepest drop in more than a month, to 47.22 euros. That pared the year’s gains to 22 percent, valuing the company at 4.9 billion euros.

Osram agreed to sell its lamps unit, which has been carved out from the company and renamed Ledvance, as the world’s second-largest lighting company responds to a shift away from traditional light bulbs to light-emitting diodes, or LEDs. To meet the challenge, Osram aims to expand its semiconductor, automotive lighting and services businesses. 

The sale price agreed with a Chinese consortium including MLS Co. is “somewhat on the low side,” Morgan Stanley analysts led by Lucie Carrier said in an e-mailed note after the deal was announced after the market closed on Tuesday. Munich, Germany-based Osram needs to clarify how it intends to use the proceeds, while third-quarter margin weakness in some divisions was a surprise considering “exceptional organic growth,” the analysts said in a separate note on Wednesday.

Other analysts, including Peter Olefsen at Kepler Cheuvreux, said the price was in line with expectations, and Osram Chief Executive Officer Olaf Berlien defended the deal at a press conference in Munich, saying there were other offers for the unit.

“We found not only the best new owners, but we also found the ones who offered the highest price,” Berlien said. “We also have the agreement that Ledvance will pay license payments to us over the next 10 years. That should also be added to the purchase price.”

The license fees will amount to a million-euro value in “high double-digits,” Berlien said. The disposal also includes an agreement that MLS will place orders of about 100 million euros a year from Osram’s new semiconductor plant in Malaysia.

The disposal will result in a high double-digit to low triple-digit million euro pre-tax book loss, Osram said.

Revenue Gains

Third-quarter net income slumped 57 percent, more than analysts expected, to 28 million euros, partly due to one-time costs related to the sale, Osram said in a statement on Wednesday. Revenue rose 11 percent to 1.44 billion euros on a like-for-like basis, in line with analyst expectations, as deliveries were brought forward to ease the separation of the lamps unit.

“The momentum of the excellent first half of the year also continued in the third quarter,” Berlien said in a statement. “Despite an expected weaker fourth quarter, we are approaching another record year with full steam.”

Osram reiterated its expectations that revenue will increase from the year earlier, and that adjusted full-year earnings before interest, taxes and amortization should reach more than 10 percent of sales. Osram has raised its profit outlook twice this year. The full-year dividend will be kept “at least stable” at 90 euro cents, the company said.

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