ACM sells 44% of this Leica shares to Blackstone

Leicas press release:
Leica Camera gains strategic investor in Blackstone

ACM Projektentwicklung GmbH will remain the majority shareholder

London, Solms: The Blackstone Group (NYSE: BX) and ACM Projektentwicklung GmbH today announced they have agreed a strategic partnership whereby investment funds advised by Blackstone will acquire, indirectly through a holding company, a 44% minority stake in Leica Camera AG (“Leica”), to support Leica’s international growth plans. ACM and Blackstone have agreed that the value of the transaction will not be disclosed. The transaction is subject to regulatory approval and is expected to close in Q4/2011.
Headquartered in Solms, Germany, with 1,150 employees, Leica has a long tradition of manufacturing premium-segment cameras and sport optics products. Over the past sixty years, Leica has grown to become a leading German brand and is seen as the epitome of German engineering excellence and an ambassador of the “Made in Germany” quality seal. Leica has become synonymous with the best tools of the trade, blending hand-crafted quality with a dedication to precision mechanics and producing the best optics the industry has to offer.
Building from this highly successful market position, Leica now endeavours to expand the business into new markets. Blackstone is seen as the right partner to support Leica management to achieve these goals in light of its global footprint, in particular with significant operations in Asia, and its development capital and strategic expertise.
Dr. Andreas Kaufmann, Chairman of the Supervisory Board of Leica commented on the transaction: “With Blackstone we have gained an experienced and internationally established strategic partner, which also understands and appreciates the established brand philosophy and business model of Leica. Following the successful turnaround of the business and record sales last year, we are now focused on the continued development of the brand, its products and our growth plans into new markets such as Asia, South America and the Middle East. ACM has no plans to sell more shares in Leica Camera AG. Our long term strategy is to accompany Leica Camera in its continued expansion worldwide.”
Axel Herberg, Blackstone Senior Managing Director, said: “Leica is deeply rooted in Germany’s history and we would like to help grow the business in a manner that is true to this heritage, ensuring that the entrepreneurial spirit that makes Leica unique is preserved. We are very excited about supporting Leica to secure long-term commercial relationships, specifically in emerging markets, and help strengthen the company’s operational and retailing capabilities globally.”
Leica Camera AG concluded the 2010/2011 financial year with record sales of € 248.8m. The Hessen-based traditional manufacturer of cameras and sport optics products increased turnover by 57.2 % compared to the previous year (€ 158.2 m). The operating result (EBIT) increased almost six fold: it rose from € 7.4 m in 2009/2010 to € 41.6m. The consolidated surplus also took a positive turn: at € 36.3 m it is more than eleven times the previous year’s figure (€ 3.2m). The sales increase is attributed above all to the strong demand for the two camera systems, Leica M and Leica S.



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That would seem to put an end to all the sentimental talk about the cost of manufacturing and the viability of a traditional, hand-tailored product.

The market conditions have now been fulfilled for another player to enter the market with a digital body priced 50% or more below Leica's offerings.

1) Leica's survival is not in question (hence no company will have to bear the cross of killing a tradition)
2) The buyout effectively ends any substance to the value-added aspects of the brand
3) The recent commercial success of the brand has created positive conditions for further market segmentation
 
noimmunity said:
That would seem to put an end to all the sentimental talk about the cost of manufacturing and the viability of a traditional, hand-tailored product.

The market conditions have now been fulfilled for another player to enter the market with a digital body priced 50% or more below Leica's offerings.

1) Leica's survival is not in question (hence no company will have to bear the cross of killing a tradition)
2) The buyout effectively ends any substance to the value-added aspects of the brand
3) The recent commercial success of the brand has created positive conditions for further market segmentation
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I don't understand business jargon. What are you saying? Explain, please?
 
Private equity [when they are full owner] are known to inflate the balance sheet with leveraged loans to its subsidiaries - also known as the plague of the locusts. It makes me sad.
The other thing is a possible motive to move to pure luxury - LVMH style. That could imply many self-owned or franchised shops with high inventory costs.
That will be reflected back on the cost of goods - not a good sign then.
albert
 
Blackstone is in the investment business. I suspect that they will inject capital (perhaps leveraged) in an effort to accelerate growth (strike while the iron's hot and Leica products are in-demand), then sell the business to one of the luxury brand conglomerates to manage.
 
Maybe they want to invest in more production capacity? If people who want to are having trouble buying cameras and lenses, that's profit lost.

I would welcome lower-cost asia manufactured model(s) alongside higher cost portugal/germany ones.
 
The actual owner is "ACM Projektentwicklung GmbH, Salzburg", an investment company founded with the capital of Dr. Kaufmann. He had a personal interest to bring Leica Camera back into business and since Leica is back in business after some tough years it might now be the best moment for him to get some of the money back that was needed in the recent years to support Leica.

If Leica will become a luxury goods company or something else, nobody knows. The only thing sure is that the myth of the "handcrafted German precision camera" is what it is, just a myth but helps selling, especially in the Asian market.
 
Rob-F said:
I don't understand business jargon. What are you saying? Explain, please?
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I'm saying two things. First is what Fred says, that Leica is going to "move to the LVMH Moët Hennessy - Louis Vuitton model". Second, this move clears the way, in terms of marketing (not R&D), for somebody else to make a lower priced digital RF alternative.
 
porktaco said:
ducati was always in dodgy financial straits pre-TPG. since then, they've broadened their product line, won a crapload of races and maintained their spot at the top of the tech pyramid. and they're just as sexy now as they were 25 years ago. maybe more.
in a best case world, leica would introduce a new premium M10 at a $7000 price point, an M9 v2 at $5000, an M9-lite at $2500 and an x-100/nex killer based on the x-1, and have enough volume for all this to make sense.

hey, a guy can dream.
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Not at all. Their more recent racing success is undeniable, but they do not have the same product differentiation from the glory days of the 1960s and early to mid 1970s. Their bikes were unique back then, in every way, particularly after the first twins arrived. Some enthusiasts would regard the acquisition by TPG as the beginning of the rot, as a proud (but flawed) name became a consumer commodity, plaything of the rich and movie stars, and a brand name to be applied to all manner of dubious accessories and merchandising, in a manner that verged on whorish. In short, their commercial success was assured, but they sold their soul to get it. God knows the bevel twins had their issues, but nothing the factory has made for twenty years, with the exception of the original 916, has an ounce of charisma compared to their 350D, 750 Sport, or first 900SS. Of all the once great Italian marques, only Moto Guzzi remains the genuine article, (and how they survived the desolation of the De Tomaso years I will never know).

I'm not sure how any of this translates to Leica, however and, you now have me pondering when we can expect to see a Ferrari-badged limited edition of the M9...dear oh dear.
Regards,
Brett
 
There is nothing inherent in this transaction to indicate they will move to any 'model' so that is speculation.

maddoc has it right.

If I were a stockholder, what is the point of opening new markets when they can't fully service the markets they already have open? It's simply ridiculous how long it takes to get a lens shipment from Leica as a dealer.
 
hope this wont lead to endless special editions and luxury toy making, like before. their digital camera product lines are now established, and maybe some cash in bank too.
 
Seems like people are traumatized by the hermes years. Obviously Leica wants to sell more, and it is clear that they can't make M9s and Summiluxes fast enough to meet demand in the US, Europe, and Japan, as DigitalIntrigue says, let alone China, where I'm sure the market is growing enormously. If Kaufmann's long-term goal is to make Leica successful, as he says it is, then he needs investment for R&D and to expand production capacity, and that's what he's getting. I wouldn't read anything insidious into it, and I doubt Leica could have a better owner right now than him. If he wanted to shift production to Asia he wouldn't need the seed money he's getting from this deal, would he?
 
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