Osram's Uncertain Future

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As expected, Osram shareholders voted on Tuesday to grant domination to Austrian sensor-maker ams. The move will allow Osram to become fully integrated with its majority shareholder. Information and resources will be freely shared – and no longer hindered by regulatory rules that govern the two publicly-traded companies.

How do Osram’s lighting brands fit in the new picture?

As part of the announcement, Osram CEO Olaf Berlien stated “This will enable Osram and ams together to forge the European global market leader in optical solutions.” With Osram’s fragmented business under ams control, what is in store Osram’s lighting and controls segments?

Some facts about ams:

In 2019, the company generated approximately $2.1B USD of revenue.
The company reports its business in the following markets: automotive, industrial, medical and consumer. The consumer market (i.e. mobile phones and technology) comprises 74% of revenues.
The Americas comprised approximately 2% of its total sales in 2019.

Osram has a very segmented business with three main business units: Opto Semiconductors, Automotive and Digital (which includes lighting and controls brands.) ams reportedly pursued assets of Osram mainly for the semiconductor segment – a complementary product offering to ams’ current products in many similar markets. Considering that ams and Osram Opto Semiconductors will together attack those markets, what will happen to the other brands – including the lighting brands?

Our prediction for Osram's lighting and controls brands:

SCENARIO #1: KEEP EVERYTHING TOGETHER

Since 2019 Osram and ams leadership have made many public statements about the synergies of the two businesses. Nearly all of them are focused on OEM markets for sensors and optical components. The end-market lighting brands of Osram make up a smaller sliver of the overall Osram/ams business, so keeping the lighting brands as part of the new entity seems extremely unlikely.

SCENARIO #2: SELL THE LIGHTING & CONTROLS CARVE-OUT

It’s possible that a buyer will emerge with a desire for all of the Osram lighting & controls brands, but this scenario seems improbable. The lighting businesses span the diverse markets of horticultural, industrial, architectural, theatrical lighting and energy management controls. It’s unlikely that one buyer will want the entire package of lighting and controls brands.

SCENARIO #3: SELL THE PARTS

The scenario that makes the most sense is to sell the brands to multiple buyers. The crown jewel of the offering seems to be the U.S.-based Fluence horticultural lighting business. Other businesses like Traxon and Encelium have value, but they continue to restructure and shed people over the years, creating uncertainty about the long-term viability of the brands. Clay Paky has had a rough 2020 – facing the pandemic double-whammy of being an Italy-based business focused on the currently-suffering live events and theatrical markets. We expect to see the brands sold to multiple buyers – some of them possibly at clearance rack prices.