ACM sells 44% of this Leica shares to Blackstone

[porktaco]

note - the wall st journal says blackstone is buying shares from ACM, but that really doesn't feel entirely right. blackstone will want money to go into leica, not unter den mattress. unclear how that does or doesn't happen right now.

 

[monochromejrnl]

Any examples of a publicly traded company where this is the case? I'm just curious. Thanks.

Magna international until very recently. Founded by Frank Stronach founded the company and had preferred shares that gave him voting control of the company until Hsu retirement a year or two ago.

he controlled the company through multiple voting shares but only owned 4% equity of the company.

 

[Sarcophilus Harrisii]

as someone who owned and raced a 750 bevel twin (and owned a 350 single), i can tell you that the newer bikes are - to me - better in almost every way. they're faster, more reliable, hold their own better against the japanese bikes and have carved out a market niche. there are more models and the pace of innovation seems much faster. now, i will grant you that none are quite as sexy as a 750 sport or a 750ss, and that by going belt rather than bevel you lose something (if only the opportunity to put a sight glass on the top bevel gear casing) but i think the newer bikes are awesome. like, wicked awesome. there are a whole bunch of them i'd like to own. and, having worked on the neanderthal electrical system of a 1973 750 (ok, having NOT worked on it), i think there will be a lot fewer WHAT THE F*** moments with the new bikes.

i'd like to see leica do something similar. move the design forward while not losing touch with the past. you can't run the company on carburated bevel twins forever, and you can't rely on black MPs to make your business forever.

also, it's interesting to note that the old ducatis were really not great race bikes. they had a very slow steering setup and were a pain in the ass to move around. the new ones are as quick to steer as any japanese bike and have kept a lot of the v-twin advantages. this would be like, for example, having an OVF/EVF hybrid on an m10. the new sets of owners made a bet to appeal to performance, raised prices and created a great market for themselves.

private equity is hardly prince charming on a white horse, but in some cases it does work out. i'd like this to be a rejuvenator for leica.

Perhaps I should have mentioned my ownership of some of the classic models over some years, I am not blind to their faults having repaired them myself.

Despite some faults they more than held their own against the Japanese competition in several key ways, not least of which was handling. The oriental competition at the time, essentially, didn't (I have owned enough Z1s H2s and other early Japanese machines to know, first hand). Yes, the twins were slow steering, but they were also very stable and handled well. You need to remember that even today, few owners buy them to race on the track despite their racing successes in recent years (although they also had more racing success in the past than I think you give them credit for, if you check the history books).

But I think you have missed the point I made. Which is not that the product was better in decades past in every way. It wasn't.

What has changed, is that the differences that made the bikes different from, say, the competition at Honda, Suzuki et al, are now, not so great.

I'm no longer sure how to relate this to the recent changes at Leica except that they may, perhaps, in the future have to face some hard decisions about their branding and corporate values. In any case (although I did not begin the comparison to Ducati) I'll no longer take the discussion off topic. This is after all a photography discussion forum, not a motorcycling one.
Regards
Brett

 

[tbarker13]

You are of course absolutely right. My take is that they are betting on Andreas Kaufmann, rather than Andreas Kaufmann betting on them. His passion has beaten most money sharks' gambles.

Cheers,

R.

Oh I'm sure you are quite right that they see something in the company they think is worth investing in. But Blackstone isn't the kind of company that makes passive investments. If they've bought nearly half the company, they'll be doing more than simply waiting for their dividend payments.
And they'll have tremendous expertise when it comes to leveraging the company's new capital when it looks to expand, etc.

 

[Shade]

Endless limited editions? They're still there and they'll always be there I'm sure. For those with deep pockets.

 

[rxmd]

note - the wall st journal says blackstone is buying shares from ACM, but that really doesn't feel entirely right. blackstone will want money to go into leica, not unter den mattress. unclear how that does or doesn't happen right now.

Why? A private equity investor indeed wants money to go into a firm, but preferably customers' money, not their own money.

Blackstone has bought a share in Leica. The investment of a private equity investor in a company does not go to the company, it goes to its former owners. Blackstone will now try to increase the value of Leica, and hence of Blackstone's shares, before selling them off again. In the strict sense, pumping Blackstone money into Leica itself, rather than into ACM in exchange for partial ownership of Leica, would actually hurt their bottom line.

 

[jsrockit]

It's often done through two-tiered shares. The New York Times and, I believe, the Washington Post operate that way. They'll have a Class B and Class A stock. Or they may call it "preferred" and "common."
In a nutshell, a preferred share may equal 10 votes, where a common share gets 1 vote.
So the smaller class of preferred shareholders have more control, while owning fewer shares.

Google is another example. It's founders own Class B shares, while they generally only sell Class A shares to the public. It helps them keep control of the company, while still gaining access to capital markets and the money that offers for growth.

I understand the difference between common and preferred and that's a good point. However, does leica have anything but common shares?

 

[ChipMcD]

I understand the difference between common and preferred and that's a good point. However, does like have anything but common shares?

Leica Camera is a German Aktiengesellschaft, which is a form of organization generally analogous to our stock corporations. Nevertheless, I believe that German corporation law is far less flexible than U.S. corporation law with respect to slicing and dicing preferred stock. Here, in Delaware at least, preferred stock can look like anything from common stock to debt, depending on how the certificate of designation is drafted. I'm not sure that's the case in Germany, but I could be wrong. Also, the work force will have members on the German analogue of the board of directors. If it is true that Blackstone bought stock from ACM, it could only buy what ACM owned. So if ACM's stock was only of a single class, that's all Blackstone could buy. Finally, I would not be surprised if some of the Blackstone purchase was directly from Leica Camera itself in order to infuse funds for expansion, etc.

As an essentially privately held company, Leica won't be making filings with the SEC to disclose this. I don't know if Blackstone is publicly held now or not. If so, it may have had to file something with the SEC, which would be available on the EDGAR system.

 

[porktaco]

Why? A private equity investor indeed wants money to go into a firm, but preferably customers' money, not their own money.

Blackstone has bought a share in Leica. The investment of a private equity investor in a company does not go to the company, it goes to its former owners. Blackstone will now try to increase the value of Leica, and hence of Blackstone's shares, before selling them off again. In the strict sense, pumping Blackstone money into Leica itself, rather than into ACM in exchange for partial ownership of Leica, would actually hurt their bottom line.

say you have a million dollars. you're going to invest in a company that has one shareholder - the chairman. do you: a) buy shares from the chairman himself, with all the million bucks going into the chairman's personal account with none into the business itself, or b) from the company, with the whole million going into the company to run the business, and the heck with any dilution the chairman suffers?

right

you put the money into the company.

 

[rxmd]

Leica Camera is a German Aktiengesellschaft, which is a form of organization generally analogous to our stock corporations. Nevertheless, I believe that German corporation law is far less flexible than U.S. corporation law with respect to slicing and dicing preferred stock. Here, in Delaware at least, preferred stock can look like anything from common stock to debt, depending on how the certificate of designation is drafted. I'm not sure that's the case in Germany, but I could be wrong. Also, the work force will have members on the German analogue of the board of directors. If it is true that Blackstone bought stock from ACM, it could only buy what ACM owned. So if ACM's stock was only of a single class, that's all Blackstone could buy. Finally, I would not be surprised if some of the Blackstone purchase was directly from Leica Camera itself in order to infuse funds for expansion, etc.

As an essentially privately held company, Leica won't be making filings with the SEC to disclose this. I don't know if Blackstone is publicly held now or not. If so, it may have had to file something with the SEC, which would be available on the EDGAR system.

Leica only has common stock. There are 16,498,422 shares, each of them corresponding to exactly one vote. Source: Leica's 2011 shareholder meeting.

These things are not entirely secret, Leica is still publicly traded since the squeeze-out of the minority shareholders failed in court in 2008.

 

[rxmd]

say you have a million dollars. you're going to invest in a company that has one shareholder - the chairman. do you: a) buy shares from the chairman himself, with all the million bucks going into the chairman's personal account with none into the business itself, or b) from the company, with the whole million going into the company to run the business, and the heck with any dilution the chairman suffers?

right

you put the money into the company.

Leica has more than one shareholder; ACM only holds about 97.5% of the shares.

Basically what you are describing is an equity offering of new shares by the company. Under German law this would be called a Kapitalerhöhung, which has to be approved by the general meeting of shareholders and registered in the German trade register in order to come into force. (You can't dilute stock just like that if you have minority shareholders around, at least not under German law.) If a Kapitalerhöhung has happened, I can't seem to find a trace of it currently; Leica's last general meeting was in August and the documents don't mention anything like that (Leica makes these things public: http://www.leica-corporate.de/investor_relations/annual_general_meeting/2011/index.html).

Also, Leica's press release simply mentions a purchase of Leica stock from ACM by a Blackstone-controlled investment firm.

At least that's how I understand it, but I could be grossly wrong.

 

[notraces]

While Blackstone's 44% ownership gives them a minority position, what's more interesting is the relationships they have with the other 56% - I suspect, and I could be wrong, they have strong ties (alliances) to key shareholders - which, gives them even more leverage.

I don't see this as being good or bad - at the moment. Time will tell.

 

[Roger Hicks]

While Blackstone's 44% ownership gives them a minority position, what's more interesting is the relationships they have with the other 56% - I suspect, and I could be wrong, they have strong ties (alliances) to key shareholders - which, gives them even more leverage.

I don't see this as being good or bad - at the moment. Time will tell.

The key shareholder is Dr. Kaufmann. If Blackstone's have 44%, and minority holders have >3% (which I believe to be the case) then he holds 51%.

Cheers,

R.

 

[JRG]

The key shareholder is Dr. Kaufmann. If Blackstone's have 44%, and minority holders have >3% (which I believe to be the case) then he holds 51%.

Cheers,

R.

That's also how I read what I've been able to find.

 

[monochromejrnl]

I suspect Dr. Kaufmann accepts that passion alone isn't enough to fulfill Leica Camera's commercial potential. Otherwise he won't have sold almost 50% of equity stake in the business to a company that is in the business of buying and selling businesses, not operating them in the long term.

 

[Tom A]

One of the pieces of news I heard at LHSA in Pittsburgh last weekend is interesting. Leica is starting to produce MP's and M7's again! The demand for filmcameras, particularly in Asia has increased significantly and their inventory was depleted.
It turns out that one of the stumbling blocks was the slow shutter speed mechanism. The company that made it, no longer was able or willing to supply it. Leica had to learn how to do it themselves!

 

[hipsterdufus]

It turns out that one of the stumbling blocks was the slow shutter speed mechanism. The company that made it, no longer was able or willing to supply it. Leica had to learn how to do it themselves!

Interesting info. Seems better that Leica makes such a component in-house anyway. Thanks for sharing.

 

[veraikon]

An article from the local ("Wetzlar") newspaper http://www.mittelhessen.de/lokales/...ica_setzt_voll_auf_Asien.html?em_index_page=1 ( please use a translator)
IMHO interessting

_ diagramm with the distribution of shares.
ACM (= Kaufmann) 53.66%
others 2.44%
BS (=Blackstone) 43.9

-some future "plans" of BS :
_synergy with Jack Wolfskin (a german outdoor clothing supplier, also BS owned)
(I always missed the Jack Wolfskin Leica Outdoor bag 😀 )
_ asian markets should served with 5 time more volume than now.
_ in future 200 Leica shops (today 63)
_ BS will get one seat in the board
_ There will be no further capital input in Leica. If it will be necessarry both partners will share it.
_ Leica will open the "new plant" in Portugal in 2012, the Wetzlar plant will opend in End of 2013

Eine Kapitalzuführung in das Unternehmen sei derzeit nicht notwendig, erklärte Herberg. Sollte dies in Zukunft für weiteres Wachstum der Fall sein, werde das Geld von beiden Partnern kommen. Kaufmann schloss den Verkauf weiterer Leica-Anteile aus.

Blackstone wird einen Sitz im Aufsichtsrat bekommen. Die Unternehmensführung bleibe unverändert, erklärte Mehrheitsgesellschafter Andreas Kaufmann, der auch dem Aufsichtsrat vorsteht.

Während auf der Iberischen Halbinsel bereits im kommenden Jahr eine neue Produktionsstätte bezogen wird, müssen die deutschen Leica-Mitarbeiter ein Jahr länger warten: "Wir werden Ende 2013 von Solms nach Wetzlar in den Leitz-Park umziehen", sagte Vorstandsvorsitzender Alfred Schopf.

 

[porktaco]

wow. really, wow. this looks surprisingly favorable to dr kaufmann.

 

[porktaco]

Leica has more than one shareholder; ACM only holds about 97.5% of the shares.

Basically what you are describing is an equity offering of new shares by the company. Under German law this would be called a Kapitalerhöhung, which has to be approved by the general meeting of shareholders and registered in the German trade register in order to come into force. (You can't dilute stock just like that if you have minority shareholders around, at least not under German law.) If a Kapitalerhöhung has happened, I can't seem to find a trace of it currently; Leica's last general meeting was in August and the documents don't mention anything like that (Leica makes these things public: http://www.leica-corporate.de/investor_relations/annual_general_meeting/2011/index.html).

Also, Leica's press release simply mentions a purchase of Leica stock from ACM by a Blackstone-controlled investment firm.

At least that's how I understand it, but I could be grossly wrong.

german securities laws are somewhat opaque to me. so, this is interesting, and it seems consistent with other things we've learned today. what's still unclear is what happens to the money, and whether dr k was obligated to inject some or all of the money he received from blackstone into leica. so far, there is no evidence of this, but that would go against common practice. i'm staying tuned for (wait for it) film at 11.