October 10, 2016 / 2:27 PM / 10 months ago

China's Sanan puts Germany's Osram in takeover spotlight

SHANGHAI/BERLIN (Reuters) - Chinese chipmaker Sanan Optoelectronics confirmed on Monday it had been in "preliminary contact" with Osram after reports that it was interested in buying the lighting group lifted the German firm's shares.

Osram is switching focus from light bulbs to lighting technology, selling its lamps unit and investing a billion euros ($1.12 billion) in a new factory in Malaysia to make chips for LED lights, making it a potential target for chipmakers such as Sanan.

If Sanan were to pursue a bid for Osram, which has a market capitalisation of 6 billion euros ($6.7 billion), it would be the biggest German company yet to be bought by a buyer from China, which is striving to become a leading nation in technology within a few years.

Such moves have provoked disquiet in some quarters in Germany, prompting close government scrutiny from Berlin.

"Our company has had preliminary contact with Osram," Sanan said in a statement posted on the Shanghai stock exchange.

"To date, we have not had any negotiations regarding transaction details such as the scope or the price. Neither have we signed any binding documents."

Osram shares had risen 2.8 percent in early trading, but fell after Sanan's statement that it had only had one face-to-face meeting with the German company regarding a potential acquisition or cooperation deal.

The stock was trading 0.2 percent lower at 1234 GMT.

"Osram's attraction presumably is the LED IP (intellectual property) cross-licensing to which it (Sanan) will only gain access upon acquiring a majority stake," Barclays capital goods analysts wrote in a note.

"These IP rights will allow Sanan to sell its chips legally outside of China, something which it has not been able to do thus far."

A potential Osram suitor could buy Siemens' 17.5 percent holding in Osram as a precursor to making a takeover bid for the whole company. Siemens was not in agreement with Osram's strategy switch to invest heavily in LED chips.

A person close to both companies told Reuters that Siemens had been close to selling its stake to a Chinese buyer before Osram announced its new LED-focused strategy in November - a move that caused a 30 percent share price collapse.

Siemens would therefore be very careful about offering its stake to a Chinese bidder and would more likely wait for a public offer to shareholders, a source told Reuters on Friday.

Both Osram and Siemens declined to comment.

ROBOT DEFENCE CRUMBLED

In the 4.5 billion-euro takeover of German industrial robot maker Kuka by Chinese household appliance maker Midea earlier this year, Berlin initially sought a deal to limit Midea's stake to 49 percent.

It had wanted to curb the Chinese company's influence on what it viewed as a national champion in a key industry, but eventually allowed the takeover to go through after major German shareholders in Kuka sold their stakes to Midea.

The case of Kuka brought the issue of Chinese takeovers of German companies to the forefront of political attention - although it was just the latest, and largest, in a string of such deals this year.

"The Kuka deal has changed one thing - that's the awareness," said Thilo Ketterer, head of consulting and auditing firm Roedl & Partner's China desk.

Roedl & Partner advised China's Skyworth when it bought German television maker Metz last year, and Ketterer said the firm was pitching for other deals where German automotive, environmental and medical firms were seeking foreign investors.

"They are looking for Chinese investors bringing not only money - that's not so important - but the Chinese have one key advantage: They have a clear strategic view from the government and a huge domestic market behind them," he said.

The German economy ministry said it had taken note of media reports of a Chinese takeover bid for Osram, but said it was a company issue on which it could not comment.

A ministry spokesman added that Germany was an open economy that welcomed investment by foreign companies but said the government wanted to ensure that competition with other countries was on a level playing field.

($1 = 0.8928 euros)

Reporting by Shanghai Newsroom, Paul Carrel in Berlin and Georgina Prodhan in Frankfurt, Jens Hack in Munich; Writing by Georgina Prodhan; Editing by Ludwig Burger and Alexander Smith

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