Search Results for: Osram

Special situation update: Innogy, Osram, PNE AG, AGROB & Comdirect

Innogy Tendered Shares

A quick update on this “cheap option play”:  To a small extent this has developed better than I intitially thought as I had mentioned in the comments. My initial expectation would have been a small loss. However, E.On now has increaesd the price for the tendered Innogy shares voluntarily to 37.59 EUR which, inclding the dividend of 1,40 will lead to a small profit (before taxes and cost) . However the ultimate upside, if there is a lawsuit, will be smaller as the E.On shares dropped to 9 EUR and the theoretical value of the tendered shares is now 4.371*9= 39,34 EUR.

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Quick update: Osram Special situation

Disclaimer: This is not investment advice. PLEASE DO YOU OWN RESEARCH.

Ouch, another day, another problem. Yesterday, one of my Special situation stocks Osram lost around -7%.

What happened: The largest shareholder  Allianz Global Investors (AGI) announced that they do not support the offer as they consider the price of 35 EUR per share as too low.

A few observations from my side:

  1. AGI had purchased more Osram shares in the past few months. Beginning in July they announced that they crossed the 10% threshold
  2. However in their press release they talk about >9% stake so they have sold shares in the past 4 weeks, clearly at a price of lower than 35 EUR. So while AGI is critisizing Osram managment for not believing in their company, AGI (or parts of them) also seems to have some problems in believing their own investment thesis.
  3. The press release reads like a marketing pitch for their “active management approach” with high fees which clearly is under threat from passive startegies
  4. They state that “at the moment they would not accept the offer” which in my opinion is not a super hard statement and we are relatively early in the acceptance period
  5. Although AGI states that that they are investors since the initial listing (which is natural if you had owned Siemens shares which they surely had), in various articles it has been mentioned that AGI’s average purchase price is much higher than the 35 EUR offered as they seemd to have increased their position significantly when the stock still went up.
  6. As the basis for their current opinion they use an “independent fairness opinion”. Why do they need that ?

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Special situation quickie: Osram take-over at EUR 35 /share

This will be a very short one:

Bain Capital and Carlyle want to take over Osram at 35 EUR per share. The offer is friendly as Managment and Supervisory board have agreed to the takeover.

The offer runs until beginning of September and minimum acceptance level is 70%.

There is no detailed offer document out now yet.

Nevertheless I established a 2,5% position at ~33.1 EUR, providing a 5,7% potential return.

Major risk is in my opinion politics (loss of jobs), chances to the upside could come form activists pushing for a higher price. In the meantime there could be clearly hick-ups (not reaching the 70% because of activist involvement) but Bain and Carlyle are pros.

The buyers are top tier PEs who execute this kind of offers well and have the money.

For those investors who remember: I looked at the Osram spin-off 6 years ago, but then failed to buy the stock because my limit was a few cents too low. So I know the company relatively well. This doesn’t of course guarantee any success ……

Short cuts: IVG, CIR SpA, Osram


After a few days of calm, it seems to get interesting again. A few days ago, an American hedge fund, claiming to own 30% of the convertible, came out with an interesting statement.

It seems to be that IVG treated the on-loan from its Dutch issuing vehicle as structurally subordinated in the calculations issued a few weeks ago. In my opinion this would be a clear mistake.

Yesterday evening, IVG increased the pressure as it declared that no agreed restructuring plan has been achieved yet. I assume that this is not the end of the story yet, but it clealry shows that this will not be an easy walk in the park.

Edit: The subordinated bond lost further and is trading at 5%. As I have repeatedly mentioned, this will most likely result in zero recovery both, for the stock and the hybrid.


CIR SpA reported results yesterday. Operating results were mediocre, the “Highlight” was a 160 mn EUR write down at Sorgenia. So using 0.5 as P/B multiplier for Sorgenia was the right thing to do in my valuation exercise.

Interestingly, the market seems to have anticipated this already. There also doesn’t seem to be any decision about “lodo Mondadori”. The current trial is only about tax evasion at Mediaset. I didn’t find anything about the Mondadori settlement.


Osram shares jumped 4% today after the quarterly earnings release.

“The market” seemed to have expected worse numbers. To a certain extent, i find the press release irritating.

The headline reads:

Osram records profitable growth in the 3rd quarter

However, in the real world:

– Sales dropped by 2% (in EUR)
– the positive net income of 14 mn EUR was the result of a one time gain due to a disposal

In the press release, you see a lot of adjusted numbers. Free cashflow looked strong but I guess at the moment they do not invest a lot. Overall a mixed bag. But I do not like the communication style.

Missed opportunities: Osram, Praktiker, Powerland


Good idea, bad execution is my summary for this one. The main mistake was clearly some kind of “anchoring”, because I wanted to see a price below 23 in order to buy. ANother question would be if you should, as a true value investor, do such “trades” at all.

Clearly, I am not yet convinced of Osram’s long term potential, but to me it was clear that this looked very similar to Lanxess’ first day on the stock market. A friend told me that “if you miss the limit by a few cents, then the margin of safety was too small anyway”. That is a good point. On the other hand, I think one can also add “alpha” if one does those kind of trades consequently (like the KPN trade), if the odds are in one’s favour.

I mean this is the whole idea of “special situation” investing. It might not be a pure “Margin of safety trade” each time, but if the chances are 55:45 on average instead of 50/50, over time this strategy will also produce good results.

For the time being, I will however remain on the sidelines with Osram.


Almost exactly a year ago after I sold the Praktiker Bond, the Insolvency now seems to be unavoidable.

Looking back, the sale at ~44% in July looked like really bad timing in the beginning:

Clearly, this was a missed opportunity as well, as the price even doubled after I sold July 2012. But after the “restructuring”, the Praktiker bond in my opinion was a pure speculation, the odds were at most 50/50 or worse. Clearly, I did not forecast the bad weather, but overall this whole affair looked just too bad. So I do not regret this missed opportunity as the fundamental decision was clearly correct.

Just as a remark: I assume that the recovery for the bond will be very low, maybe even single digit percentage points. Everything valuable has been pledged away and I don’t think they will get any fresh money into the capital structure “below” the bond.


2 years ago, I looked at Powerland, a “German-Chinese” IPO. Already a superficial look at the company showed a lot of inconsistencies. Now it looks like that the game is over.

I am not sure why I didn’t short the company. This was clearly a case with a very big chance of being a fraud. There would have been even a second good chance when the CFO in November 2012 surprisingly left the company. So clearly a missed opportunity as I didn’t follow up on that one.

Update Osram Spin off & Lanxess

Valuation update:

That’s what I wrote 2 weeks ago:


EBITDA was ~250 mn for the first 6 months of the fiscal year 2013. If we assume ~500 mn for the year 2013 and ~500 mn net debt, then 105 mn shares at 30 EUR would mean an EV/EBITDA of ~7. If we add 500 mn of unfunded pension liabilities, we have EV/EBITDA of ~8. That is not really cheap but rather expensive for such a cyclical and capital intensive business.

2 things changed here:

1) The price was 24 EUR as a first trade, 20% lower as discussed 2 weeks ago
2) The net debt number i used was not the most recent one but from 30.09.2012. The most recent one was 0.5 bn

So overall, the current evaluation looks like a lot more reasonable (2.4+0.5)/0.5 = 5.8 x EV/EBITDA if one assumes 500 mn EBITDA.


Just for fun, I looked up some info about the Lanxess IPO in 2004/2005. Interestingly, Bayer tried to IPO Lanxess against cash as well but then had to settle for a Spin-off.

On the first trading day, Lanxess went down -6.3% from an opening price of 15.75 EUR to 14.85 EUR. This was the lowest price ever for Lanxess.

In order to get not to excited about spin-off, one should remember the HypoReal Estate spin-off from Hypovereinsbank. We all kno how this ended.

Based on the now siginficantly reduced valuation, I feel tempted to go into Osram although with only a smaller alliocation (2-2.5%) of the portfolio as a spin off special situation. I will however wait until late afternoon to finally decide.

As of lunch time, only ~7.8 mn shares have been traded, I assume there is more to come. If the price goes significantly below 23 EUR, I will be on the buying side.

Spin off watch: Osram Licht AG

In a couple of days something happens which is very rare in Germany: Siemens AG is spinning of its subsidiary Osram to its shareholders.

For a German company, this is highly unusual, especially with a subsidiary of this size. And in fact, Siemens unsuccessfully tried to sell Osram for years as a “classical” IPO for cash. Siemens has a history with IPOs of subsidiaries. They IPOed their subisidiary Infineon in 2000 at the height of the interent bubble for 35 EUR, a price never seen again:

Maybe that’s the reason why no one wanted to pay cash for Osram ?

A good description of Osram can be found here in Wikipedia.

The English language IPO prospectus for Osram can be found here.

Some thoughts on this spin off:

+ Siemens is maybe the most bureaucratic company on this planet. So “releasing” Osram from that should be worth something

+ Timing: The timing looks bad from Siemens perspective. They wanted too much when Osram was highly profitable and now it seems that they don’t really care anymore or want to get rd of it before the have to invest into the new LED technology

+ Business
Although the business is very competitive, especially the LED part is growing strongly and Osram seems to be competitive here.

There is a whole lot of information about the business in the prospectus, I would summarize it as follows

– the business in general is cyclical and capital-intensive
– 2009 and 2010 were “special years because of EU regulation for the old light bulbs
new competitors seem to be able to enter in new technologies (LEDs) without much problem or even economics of scale from their core chip businesses (Samsung, LG)
– old bulbs were replacement businesses, new LEDs last a lot longer and are more like project business
– however technological change is quicker than in the past, “disruptive changes” are a reality
– the change to new technology requires lots of investments and results will suffer (and maybe the main reason why Siemens wants to get out now)

Major issue with this spin off:

Management compensation: High base salaries, insignificant share ownership of managers. This is was the prospectus says:

Shareholdings of Managing Board Members
The members of the Managing Board do not, apart from Siemens AG shares, directly or indirectly, hold any Shares or options on Shares of the Company as of the date of this prospectus. The members of the Managing Board in total hold 6,292 shares in Siemens AG for which 629 shares in OSRAM Licht AG will be issued upon the Spin-off becoming effective.


Siemens AG has granted the current members of the Managing Board of OSRAM Licht AG (as well as other executives of the future OSRAM Group) in the first quarter of the Fiscal Year 2013 a transaction bonus. After the Spin-off takes effect, OSRAM Licht Shares in a value of at least 50% and a aximum of 200% of the target amount established individually for each member of the Managing Board will be granted. The target amount is €2,500,000 for Wolfgang Dehen and €1,000,000 for Dr. Klaus Patzak as well as €250,000 for Dr. Peter Laier

One of the success factors of spin offs is that Managers are well aligned with share holders. I don’t think that is the case here despite the “spin off gift”.

Other observations:

Pension plan: 500 mn EUR have been injected in 2012 (contributed by Siemens), overall size of 2 bn is quite large.

Competitor Philips

Although I didn’t want this to turn into a fully fledged business analysis, I couldn’t help looking quickly into Philips’ 2012 annual report. although Philips Lighting is significantly larger than Osram (8 bn sales vs. 5 bn EUR), the bottom line of Philips Lighting was already negative in 2011 and even more in 2012. As Osram, they are reorganising the business. Their program is calles “Accelerate” vs.”push” at Osram. Funny that those great programs all sound so alike. Interestingly, Osram was slightly more profitable than Philips Lighting, both in 2010 and 2011. SO size alone doesn’t seem to be the big advantage.

It seems that both, Philips and Osram have to fight hard against the new competitors in the LED market.


EBITDA was ~250 mn for the first 6 months of the fiscal year 2013. If we assume ~500 mn for the year 2013 and ~500 mn net debt, then 105 mn shares at 30 EUR would mean an EV/EBITDA of ~7. If we add 500 mn of unfunded pension liabilities, we have EV/EBITDA of ~8. That is not really cheap but rather expensive for such a cyclical and capital intensive business.


For the time being, I think the Osram spin off doesn’t look very attractive at the prices (30-35 EUR per share) that were mentioned in the press. The most critical point is in my opinion that I don’t see a strong alignment of management and shareholders in this case.

This could be one of the cases where the first 1-2 years could look pretty bad. If at some point management would buy shares in significant numbers, this might be a sign to look at Osram again.

An unconventional idea would be actually to short the share right after the spinoff.

Siemens Energy AG Spin-OFF – ANother Interesting Member of the “Ugly duckling Spin-off Family” ?

Disclaimer: This is not investment advice !!! PLEASE DO YOUR OWN RESEARCH.

At first a big “health warning”: My track record with Spin-offs is awful although I dedicated significant efforts into this area. Over the last years, I missed out on several good ones (Uniper, Trisura, Osram) and I unfortunately invested in a few bad ones (, Metro). My best spin-off investment so far was Italgas.

Siemens Spin-off history

Siemens itself is an interesting case, as under (soon to be former) CEO Joe Kaeser, and even before, they are one of the few German companies that use spin-offs more or less frequently. Over the years, Siemens has spun off for instance Quimonda (bankrupt), Infineon (has recovered quite well), Osram (taken over by AMS) and Siemens-Gamesa (very volatile but strong performance lately). Overall I would say that on average the Siemens Spin-offs did very well despite being mostly “ugly ducks” at the time of spinning off. Siemens Healthineers in comparison was not an ugly duck (despite the stupid name) and that’s why they actually IPOed it.

Siemens Energy AG Spin-off

This is the latest spin-off from Siemens, spun-off on September 28th with a first price of around 22 EUR, a lot lower than initially expected. As we can see in the chart, the shares dropped at first but now recovered to the initial level in line with Siemens AG and the DAX:

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All German Shares part 28 (Nr. 601-625)

Another 25 randomly selected German stocks. This time, there is only one “watchlist candidate” among them.

601. Elbstein AG

Elbstein AG is a 29 mn EUR market cap holding company that is majority owned (75%) by the billionaire Ehlerding family. The company invests among others in listed German companies. The stock price is flat over the last 5 years or so which might indicate that the investment success is limited. Nothing to see for me, “Pass”.

602. Rheinland Holding AG

Rheinland Holding is a small German Insurance company with a market cap of 119 mn EUR. The stock chart is “super boring”, although with a small long term uptrend that one rarely sees with insurance companies over this period:

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