Germany’s Osram plans to transfer its 2 billion euro ($2.5 billion) general lamps business into an independent legal structure, paving the way for a possible spin-off or sale and allowing it to focus on automotive lighting and components.
The move to separate the declining business representing about 40 percent of its revenue, which follows a similar move by bigger Dutch rival Philips. lifted Osram shares more than 6 percent to an all-time high of 51.30 euros.
“The independent legal structure is to provide the basis for the further development of the business, while also considering partnerships,” Osram said on Tuesday.
The transfer will involve the bulk of Osram’s traditional lightbulb and LED general lamps units, leaving it with specialty lighting and components mainly for the automotive sector as well as project lighting.
Like Philips, Osram is racing to keep pace with a rapid rise in Asian LED digital light makers, who can offer lower prices thanks to fewer overheads than legacy lighting makers in Europe or the United States.
Osram Chief Executive Olaf Berlien had been reviewing strategy since taking the helm in January and Chief Financial Officer Klaus Patzak told Reuters last month Osram could consider splitting off parts.
Osram said the move would be submitted to its supervisory board when it next meets on April 28.
Analyst Karsten Iltgen at Bankhaus Lampe said: “It certainly makes a lot of sense. It’s what we wanted from the company, to focus not only but especially on automotive, where they can definitely get more value.”
He said he would value the remaining parts of the business alone at about 50 euros per share and the parts to be separated at about 10 euros, compared with Osram’s price of 49.13 euros before Tuesday’s statement.
Philips is considering options for its lighting business and favors a separate stock exchange listing. It has also agreed to sell an 80 percent stake in its lighting components business for $2.8 billion to investment fund Go Scale Capital.
Osram, spun off from engineering group Siemens two years ago, is cutting capacity in traditional lighting and streamlining sales and distribution operations, axing nearly a quarter of its employees over three years.
Sales at Osram’s traditional lighting unit, CLB, fell 15 percent in fiscal 2014 to 1.96 billion euros, while the unit’s margin on EBITDA (earnings before interest, tax and amortization) was 4.6 percent, compared with 6.0 percent for the group.