Osram to spin off from Siemens, with further job cuts

Subject to shareholder approval, Siemens will spin off its lighting subsidiary Osram next year as a separate company. After shelving plans for an initial public offering (IPO) of shares, due to unfavorable market conditions, Siemens will hand over 80.5% of the Osram business to existing Siemens shareholders.

By avoiding the IPO route, the deal becomes “more independent of capital market conditions,” said Siemens. As an independent company, Osram will have access to more flexible financing options.

However, Siemens wants to retain a level of control in its subsidiary; Siemens AG will hold 17% of shares in the devolved Osram, while the Siemens pension fund will hold 2.5%. If the deal is approved by a 75% majority at the Annual Shareholders’ Meeting on January 23, 2013, then Siemens’ shareholders will receive one Osram share for every ten Siemens shares.

The discussion to make Osram a separate company has been going on for a couple of years. Siemens announced in March 2011 that it would conduct an IPO in fall of that year. The IPO was delayed due to the state of market – both the lighting market and the overall global climate – and then subsequently cancelled.

Osram is the world’s second-largest lighting company, behind Philips, and has annual sales of around EUR 5 billion.

While getting ready to split from Siemens, Osram is already under a major restructuring program involving the loss of thousands of jobs. The aim is to save a total of EUR 1 billion by 2015.

The job losses, both in Germany and internationally, are mostly via the closure of manufacturing plants that make products that are reaching the end of their product lifecycles.

But elsewhere, Osram is investing in its capabilities to manufacture products using newer lighting technologies – or, in its own words, “building up capacities in future-oriented business areas.” This reflects the changes being seen throughout the lighting industry.

For example, Osram has inaugurated a new halogen production line at its Eichstättlocation, and construction of a second line is already underway.

The company also plans to invest “a low three-digit million euro figure” over the coming years in its LED assembly plant in the Chinese province of Jiangsu. This plant will manufacture products for key segments of the Chinese market and the entire Asia region. In five years’ time, Osram expects this region to account for around half of the global general-lighting market.