Chinese Capital 'Buy Buy Buy', Germany with Mixed Feelings
German media reported that after China's "Golden Week" holiday ended, the Chinese economic topic most closely followed by the German-language media was, apart from the stock market's performance after reopening, the news that Sanan Optoelectronics intends to acquire the German century-old lighting company Osram.
The Deutsche Welle website published a report on October 11 titled "Chinese Capital 'Buy Buy Buy', Germany with Mixed Feelings," stating that the October 9 issue of the Neue Zürcher Zeitung first briefly outlined the background of the news: in July, Osram's subsidiary Ledvance had already been sold to a Chinese consortium for 400 million euros, and now a new investor has come knocking, this time with the goal of acquiring all of Osram. It is reported that semiconductor company Sanan Optoelectronics may be willing to acquire Osram shares at 70 euros per share.
The author remarked with emotion: "Chinese companies' hunger for acquiring German companies is clearly insatiable. According to a study by accounting firm Ernst & Young, Chinese investors acquired 37 German companies in the first half of the year—setting a historical record. In 2015, 39 German companies had already been acquired by Chinese companies. And the total investment scale has expanded even more dramatically: the total investment amount in 2015 was 526 million US dollars, while the figure for the first six months of this year alone has already reached 10.8 billion US dollars."
In the face of such a "buying frenzy," Germany is not without concerns. The article continues: "The largest acquisition to date—the takeover of German robot manufacturer Kuka by Chinese home appliance giant Midea—has already sounded the alarm for the German government. Because Kuka is regarded as a key company for Industry 4.0 and holds sensitive data from German industry. The efforts of Economy Minister Gabriel to persuade German domestic companies to participate in the bidding were in vain. Since the offers from Asia were unattainably high, German domestic companies chose to give up one after another. For many German companies, especially in the mechanical engineering and automotive manufacturing sectors, China is a very important market, so these German companies do not wish to have any unpleasantness with the Chinese side."
In the end, the Economics Ministry still had to give the green light to this acquisition, as existing EU regulations could not provide a legal basis for the government to give a red light. As for the current Osram acquisition matter, since the Chinese side has not yet issued a formal offer, Berlin has also not made any statement for the time being. However, since Osram provides LED lighting chips for many automotive companies and also manufactures semiconductor components for smartphones, its important position is self-evident.
The Neue Zürcher Zeitung article further points out: "The reason why Sanan Optoelectronics, which has shown acquisition interest in Osram, has aroused people's suspicion, is because it played an opaque role in another acquisition case. First, Sanan cancelled a large order from German semiconductor industrial equipment manufacturer Aixtron, causing the latter's share price to plummet to the bottom. Immediately afterwards, a takeover offer from another Chinese investor arrived at the door."
Therefore, Friedolin Strack, head of the International Markets department at the Federation of German Industries (BDI), told the Neue Zürcher Zeitung that the current priority is to eliminate the asymmetry in market access between the two sides: "When our German companies take stakes in Chinese companies, they have to face various restrictions, technical transfer rules and numerous quotas." Germany must urge China to remove these investment barriers.
The German financial information website finanzen.net analyzed this acquisition interest of Chinese companies in Osram from a purely professional financial perspective. Financial commentator Florian Westermann pointed out in an analysis article: "For Siemens CEO Joe Kaeser, this may be a good opportunity to get rid of the remaining shares in this former subsidiary in a way that is both dignified and lucrative. Three years after Osram went its own way, Siemens still holds a full 17% stake. Moreover, Kaeser and Osram CEO Olaf Berlien have already fallen out, triggered by the corporate repositioning plan the latter announced in November 2015. The stock market reacted violently, and Osram's shares plummeted at one point. What angered Kaeser was that the market value of the Osram shares held by Siemens shrank by 260 million euros overnight."
Therefore, this financial commentator believes that if Sanan Optoelectronics' intention to acquire Osram is true, this could ultimately become a transaction both parties are willing to undertake: "These (acquisition) rumors have made Osram's shareholders—presumably including Kessel—beam with delight. Investors who bought Osram stock immediately after the news broke can now see the share price has risen by 150%. If the bidding war for Osram really erupts, the stock's surge is far from reaching its peak."