Not really a big surprise since Leica has been looking for a sell since they turned around their finances. Why sell only 44%? My guess is that way Dr. Kaufmann can still own the majority (51%) of the company (he owned 95% of Leica's stock: 95%-44% =51%).
Here is the full 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.
About Leica Camera AG
Leica Camera AG is an international premium manufacturer of premium cameras and sport optics products. The legendary status of the Leica brand is based on a long tradition of excellence in the production of lenses. In combination with innovative technologies, Leica products continue to this day to guarantee superior image quality and visual perception. The headquarters of Leica Camera AG are located in the Hessen town of Solms, with a second production site in Vila Nova de Famalicão, Portugal. The company is active in 54 markets internationally and operates branches in England, France, Japan, Singapore, Switzerland, South Korea and the USA. New, innovative products have been the driving force of the company’s growth in recent years. Further information and images are available at www.leica-camera-extranet.com (login: press, password: turnaround2011) or at www.leica-camera.com.
About Blackstone
Blackstone is one of the world’s leading investment and advisory firms. We seek to create positive economic impact and long-term value for our investors, the companies we invest in, the companies we advise and the broader global economy. We do this through the commitment of our extraordinary people and flexible capital. Our alternative asset management businesses include the management of private equity funds, real estate funds, hedge fund solutions, credit-oriented funds and closed-end mutual funds. The Blackstone Group also provides various financial advisory services, including financial and strategic advisory, restructuring and reorganization advisory and fund placement services. Further information is available at www.blackstone.com. Follow us on twitter @blackstone.
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17 Comments
Who knows what this means really. Sounds like they want to support growth into immerging markets. From my (and most everyone else’s limited inside view) it’s hard to see from the product line just what they would be able to build off of in those markets. Unless of course, Leica will just continue on with the product they have – which in new markets would seem relatively new and unique?
Or, maybe Leica is ready to really impress us all next year with a new product of universal appeal, if I were a part of Blackstone, I would certainly want to know what the long-term product plans are. Too, it’s hard to imagine Blackstone not having some say in product growth/direction.
there goes the neighborhood. Blackstone is only concerned about profits. They may be minority stakeholder but it wont take them long to infect everything.
I will have to agree. My wife’s company got bought out by Blackstone – they are “Wall Street boys” and care only about the bottom line. Good that Kaufmann still has 51%. It will be interesting to see how this will play out in the next 12 months.
You may be correct – as 40% owner equals 40% say in what happens.
today the future of Leica is a little bit scarier.
With a company like Blackstone on the board, Leica will be pressed to make quick profits. This means that the name Leica will be splattered a whole range of products from unworthy cameras to badly made watches to fancy clothing no true “Leica Man” would be caught dead wearing. Sell your Noctilux 50mm now – the name Leica will mean a lot less than it does now – it will be traded away for corporate profits and executive bonuses.
It does seem that this is not your usual ‘partnering’ – I wonder what Blackstone is expecting Leica to return annually for them.
I still have a hard time believing Leica can keep the profits moving upward with the M alone (the S may be making money for them but it’s not going to turn BIG $$$) and the M will slow unless, again, they think the East is going to be the ticket that keeps the train running.
But Blackstone won’t likely be really patient with Leica – as mentioned, they play a different game than what Leica seems to have been playing. Oh, I meant 44% in my last post.
& the X1
& the D-LUX 5
& their deals with Panasonic
This is much more serious than people may at first realise. It is the beginning of great change.
Blackstone are well versed in ‘Brand Optimisation’ and will see Leica as a premium brand under- performing (which in commercial terms it is, even now in it’s much healthier state). The motivation to sell to Blackstone whilst dressed up as ensuring the future of Leica will not be to make greater cameras for the love of making greater cameras (if Leica has been doing that at all recently) but to make more cameras to make more money and leverage the brand of Leica to it’s fullest extent. Their sole motivation will be to ‘create value’ for themselves and the remaining shareholder under the auspices of creating value for others and eventually they will exit hoping to have made great return on their investment, leaving behind them God alone knows what but it won’t be recognisable as Leica in its current state. They will look at tie ups, cost reductions and outsourcing opportunities. China will probably be their number one target market, followed by Russia, India and the South American countries.
The good news is that they will recognise that to be successful they will need to make a great product, the bad news they will not have photographers in their sight but very wealthy status seekers propped up by aspirational middle income earners who hitherto saw Leicas as cameras for other people with more money than them .This will enable them to make more popular (i.e. cheaper to produce and higher margin) products that can be manufactured in droves on the back of the premium product that Leica represents and thus more profitable for them. The badge and appearance will excite, but the insides will be driven by cost to produce and margin (think Sony TV’s). Get ready for form over function. They will be well aware that precision instruments with labour intensive processes will not be where the cash is but will be the cost of doing business.
They will be able to build on what Leica is doing already but to a far greater extent, open up new markets and diversify the brand into areas like say clothing and consumables. They will outsource and reduce cost wherever they can, ramp up marketing and open up new markets. Watch out for a Leica F1 Team, A Leica Fragrance, A Chateau Mouton Rothschild label designed by Leica, a Premier League Football team shirt sponsorship or Wimbledon by Leica etc etc, things that have nothing to do with making cameras but everything to do raising awareness and with selling them.
They will attempt to keep the Leica purists and the journalists on side by producing a great product so M10′s and S3′s will be produced but with greater automation (both in production and in function) and the life cycles significantly shorter, the middle and lower end will make the Panasonic tie up look like schoolboy stuff. They will no doubt have Canon and Nikon in their sights over the longer term. At the high end think Dom Perignon Champagne or Rolex and you won’t be far out. Once great products but now very slightly inferior, much more mass produced and eclipsed by their competition at the highest level but brilliantly marketed and still with the cachet that the mass market is very slow to recognise that they are technically a shadow of what they once were.
It won’t mean bad cameras and lenses but it will mean a gradual diminution of a great product, a broader appeal and a slight dumbing down. Crusty old aficionados get ready to be miserable, Chavs get ahead of the curve and go mass producing your Leica fake Baseball caps now. Leica is about to move into the mainstream.
Sad but life goes on and Leica survives………..for now.
Well it all sounds like that is what could happen in an ideal world – but it’s equally possible that Kaufmann sold to get his initial cash back. But it’s hard to believe that the types who run Blackstone are in it for the long run. But why bother with Leica now?
Maybe they are in for the long run, because really, Leica is not a big player and the only way to do so is to take it REALLY main-stream as you say. There is so much established competition today as to make the effort almost a dead idea before it starts. Or maybe Leica is about to reinvent itself with some new, great camera that rocks the imaging world – which I doubt.
Blackstone is made up of people with A LOT of liquid cash that constantly turn it over – they are a different breed. Heck, it could be just a few that have parted with the cash as kind of a ‘hobby project’. It wouldn’t be the first time a group of money-men got together and came up with an idea (after hearing through the grapevine that some of Leica was up for sale) to get involved in something ‘different’.
Maybe the main ‘pushers’ behind the purchase are image/photo guys that have a clue and are sick and tired of Leica moving forward at a snails pace with new antique M cameras that finally went digital and an S system that is SO upmarket as to be on another planet. My naive idea is that they will bring product that is a bit more ‘professionally’ oriented like the higher end C’s and N’s. But one thing is for sure – we will continue to wait and speculate what it all means which is the one thing Leica is good at promoting.
Mr Kaufmann is a rather clever man. Why all the pessimism? Leica is building their new factory in wetzlar which has double the capacity of Solms. Now if they keep Solms running too then they can trebble their current output capacity. However to do that they need to fill their new factory with all new, state of the art equipment, and that costs money. Quite a lot of it I imagine.
Just thinking out loud.
Pessimism because for years Leica has done the same thing – a new owner comes along who likes the product – builds it up (or tries to) then sells it. Leica has always had opportunities but they seemed at least, to always be in their own control.
Things are different now – they have money-men who aren’t patient – or hang on to the past that own 44%. In a normal company that usually means changes for the better, when ‘normal’ people are involved. Yes, the tooling up and the training of new production staff takes time and $$$$. As has been mentioned, just what do they have to build a future with? The M, S2, and X1. The S isn’t a ‘market’ camera, and the M is a nice antiquated design that supports great glass that needs a major refresh (bigger eyepiece, better framing, and a host of other upgrades that many want – never mind a lower price.
The fact is, all this is still just the usual ‘outside the loop’ speculating – and maybe it should read, just how much ‘outside the box’ thinking will be taking place? And how fast will it happen before the money-men get impatient?
Again, kaufmann isn’t stupid. Hopefully the company is now ready to emerge from their research and development phase and get agressive with attacking the market. (by that I mean that they have finalized M10 & mirrorless L system designs and testing etc). They need to get agressive with the distribution and market expansion now so the infrastructure is in place when wetzlar comes online.
One thing that worries me a little though is that kodak is pretty much bust already so they will be stuck for S2 chips. Hopefully they can convince Sony or the hasselblad sensor suppliers to work with them.
No, he is not stupid. But it also doesn’t mean he will put his profit from the sale back into Leica. I think he is misguided with the S system – and everyone seems to think an M10 is around the corner – why? Too, the world economy isn’t the $$$$$ friendly place it was 5 years ago and the competition has a big head start.
The ‘investor/partner’ group got in relatively cheap – but to get it chugging full-steam ahead will take much more and then the camera world is not a guaranteed high profit maker. This is all just more speculation – only those involved really know for sure.
leica seems less focused on integrity these days than profit.
from the issues with Quality Control that have sprung up, the decision to “mass produce” more lenses/cameras, to putting a store everywhere…and now this.
it seems like another Ducati, taking a good brand and putting it on every lunchbox….
Man I was so pissed off with Ducati when the brought the 999 design out. How could they chuck in the beautiful 916 design!!
Well I hope he does put it all back into leica. There was a time when Leica was many many many times bigger than it is now. Fingers crossed the quality issues get sorted… Perhaps they are just the new production staff learning the ropes. (I’m being tentative)
What’s the bug bare with the S system? It must be a great if you’re a medium format shooter. None of the Hasselblad or phase one forms gets me interested.
The S system cost Leica a large part of it’s user base when they discontinued the R system in favor of the S. Kaufmann/Leica made a conscious choice to leave R users behind. For a small high quality company like Leica that’s a risky manuever, even if their excuse of not being able to be competitive with C and N is taken seriously.
The S is a fine camera – but it has to start with a new user base – a base that is much, much smaller than a 35mm based DSLR. Hasselblad is versatile because it can be upgraded with differnt backs for example and the results between the two are not worth arguing over. The M sales have been through the roof because of the pent-up demand for a digital M and that won’t last forever. Too, just how many more incarnations of the basic M platform can be had that will be different enough to convince people to shell out around $8k in an age of short product cycles.
It seems hard to imagine them being able to amble along with the M camera and S as the big $$$ makers. Maybe they’ll have a new jewel in a year to attract users – remember, it’s been said that Kaufmann is a big Leica guy. But he’s also human and he’s just made a big chunk of profit so who knows what he’ll do.
Leica quality issues have been around for some time