ACM sells 44% of this Leica shares to Blackstone

[porktaco]

Originally Posted by rxmd

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]

Originally Posted by ChipMcD

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]

Originally Posted by porktaco

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/invest...011/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.

[Sparrow]

Originally Posted by photomoof

Sort of... but they are not quite that simple -- conversion or voting-wise. There is no standard, one has to read the prospectus.

Here is a good explanation of one company offering in the US.

Berkshire Hathaway Inc. has two classes of common stock designated Class A and Class B. A share of Class B common stock has the rights of 1/30th of a share of Class A common stock except that a Class B share has 1/200th of the voting rights of a Class A share (rather than 1/30th of the vote). Each share of a Class A common stock is convertible at any time, at the holder’s option, into 30 shares of Class B common stock. This conversion privilege does not extend in the opposite direction. That is, holders of Class B shares are not able to convert them into Class A shares. Both Class A & B shareholders are entitled to attend the Berkshire Hathaway Annual Meeting which is held the first Saturday in May.

The Relative Prices of Berkshire Class A and Class B Stock

The Class B can never sell for anything more than a tiny fraction above 1/30th of the price of A. When it rises above 1/30th, arbitrage takes place in which someone ¾ perhaps the NYSE specialist ¾ buys the A and converts it into B. This pushes the prices back into a 1:30 ratio.

On the other hand, the B can sell for less than 1/30th the price of the A since conversion doesn’t go in the reverse direction. All of this was spelled out in the prospectus that accompanied the issuance of the Class B.

When there is more demand for the B (relative to supply) than for the A, the B will sell at roughly 1/30th of the price of A. When there’s a lesser demand, it will fall to a discount.

In my opinion, most of the time, the demand for the B will be such that it will trade at about 1/30th of the price of the A. However, from time to time, a different supply-demand situation will prevail and the B will sell at some discount. In my opinion, again, when the B is at a discount of more than say, 2%, it offers a better buy than the A. When the two are at parity, however, anyone wishing to buy 30 or more B should consider buying A instead.

... I was only aiming at sort of

[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]

Originally Posted by 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.

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]

Originally Posted by Roger Hicks

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]

Originally Posted by Tom A

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/r...m_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]

Originally Posted by rxmd

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/invest...011/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.

[Teuthida]

Originally Posted by 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!

Now if they'd bring back the M5.....

[MCTuomey]

ACM's market capitalization today is about EUR300M, based on the value of Blackstone's stake. As a PE firm Blackstone is likely looking for a 4-5 year exit at a return between 10-20%. To get there, ACM's market capitalization will have to be roughly EUR500-600 to meet that return requirement, assuming willing buyers. There must be an interesting 5-year business plan on someone's desk ...

Leica's most valuable asset is an intangible, its branding. So I have to agree with others who've said that Leica will undertake substantial investment in marketing and distribution, not just production. Increasing the value of Leica's branding is likely to contribute to higher market cap more quickly than grinding out earnings (the old school way). Probably means a plan for rarefied boutiques in the most fashionable cities and boulevards, or something like it. I'd be shocked if Leica bought a sensor manufacturer or only upgraded/built production capacity.

[rxmd]

Originally Posted by veraikon

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

(diagram from your link)

I was wondering about the distribution (why 44%?), but the point seems to be that it gives ACM/Kaufmann a buffer against the 2.44% minority shareholders, with whom he has a bad relationship ever since the attempted squeezeout. That way he can sell this buffer to somebody else as a counterweight, without losing majority himself. He probably has a deal with Blackstone that limits their resale options somewhat for the time being.

But quoting Fred, I admit to not really having a clue.

[jarski]

Originally Posted by veraikon

_ Leica will open the "new plant" in Portugal in 2012, the Wetzlar plant will opend in End of 2013

interesting info veraikon. hmm new plant to Portugal? IIRC there is/was already something there? but still, now money makers sitting firmly in boat, would have expected new plant to SE Asia

[veraikon]

Originally Posted by rxmd

But quoting Fred, I admit to not really having a clue.

+1

And thanks for the direct link (Imho the open access has a timeline ).

Mr. Puts about Leica, ACM and BS: http://www.imx.nl/photo/page152/page152.html

[veraikon]

Originally Posted by jarski

interesting info veraikon. hmm new plant to Portugal? IIRC there is/was already something there? but still, now money makers sitting firmly in boat, would have expected new plant to SE Asia

There is one in North Portugal (Villa Nova?) .
I think it won´t be a second - but like Solms-> Wetzlar, a "new" and greater facility.
The timeline (in 2012) shows that it was planed and build before BS entered....

[veraikon]

some news I don´t understand:

Leica Camera AG: Veröffentlichung gemäß § 26 Abs. 1 WpHG mit dem Ziel der europaweiten Verbreitung Leica Camera AG 20.10.2011 15:54 Veröffentlichung einer Stimmrechtsmitteilung, übermittelt durch die DGAP - ein Unternehmen der EquityStory AG. Für den Inhalt der Mitteilung ist der Emittent verantwortlich. --------------------------------------------------------------------------- Die Lisa Germany Holding GmbH, Frankfurt, Deutschland hat uns gemäß § 21 Abs. 1 WpHG am 20.10.2011 mitgeteilt, dass ihr Stimmrechtsanteil an der Leica Camera AG, Solms, Deutschland am 19.10.2011 die Schwelle von 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% und 75% der Stimmrechte überschritten hat und an diesem Tag 97,56% (das entspricht 16096478 Stimmrechten) betragen hat. 20.10.2011 Die DGAP Distributionsservices umfassen gesetzliche Meldepflichten, Corporate News/Finanznachrichten und Pressemitteilungen.

source Stuttgart stock exchange news service: https://www.boerse-stuttgart.de/de/f...ymbol=LCA1.FSE

News 20.10.11 15:54

Lisa = BS ! , but why they are owning all votes (except these of the "free" share holders) ?

[rxmd]

Originally Posted by veraikon

some news I don´t understand:
source Stuttgart stock exchange news service: https://www.boerse-stuttgart.de/de/f...ymbol=LCA1.FSE

News 20.10.11 15:54

Lisa = BS ! , but why they are owning all votes (except these of the "free" share holders) ?

Lisa is the holding company through which BS is acting in this case.

I guess the answer to your question lies in the unknown agreement between Kaufmann and Blackstone. Under German securities law there are a number of cases where a party A can hold the "Stimmrechte" (= voting rights) corresponding to a number of shares, while the actual shares are owned by a party B. In this case, BS is A, while ACM is B, and the situation is that A holds 97.56% of the voting rights, while they own only 43.9% of the shares - the actual number is probably 7,250,000 shares, corresponding to 43.94%.

In Germany, these cases where this situation can arise are regulated by the Wertpapierhandelsgesetz ("Law on trade in securities"). In particular, A might not own the shares, but hold the right to obtain them from B by a simple declaration of intent (unlikely here); A might act as trustee for B; A might hold the shares as a paid service for the actual owner B, and so on.

In all of those cases, a change in whoever holds the voting rights requires a public declaration of who holds them after the change. This is, in German, called a Stimmrechtsmitteilung, which is what you have pasted here. See the corresponding Wikipedia article (in German, obviously) for an overview.

[veraikon]

"newest" news: ACM + BS wants to squeeze out the "free" (3%) shareholers: http://www.handelsblatt.com/finanzen...n/5801964.html http://www.mittelhessen.de/lokales/t...aere_raus.html

[rxmd]

Originally Posted by veraikon

"newest" news: ACM + BS wants to squeeze out the "free" (3%) shareholers: http://www.handelsblatt.com/finanzen...n/5801964.html http://www.mittelhessen.de/lokales/t...aere_raus.html

From the second link:

Originally Posted by mittelhessen.de

Even at the last general shareholders' meeting on August 12 in Wetzlar, Kaufmann had left the impression that he was ready to leave the small shareholders untouched. At that meeting, an 11-year-old girl named Ronja from Würzburg had delivered a passionate speech defending the small shareholders.

In her outstanding presentation, she told how her parents gave her some Leica stock as a gift, that because of this she saw herself as a long-term investor and that because of this she wished for Leica to remain listed at the stock exchange. According to her, the example of Audi shows that even a small amount of stocks held by small-scale shareholders could serve to improve corporate culture and communication. "Therefore I would wish for you as the majority shareholder, Mr. Kaufmann, to refrain from a squeeze-out of the small-scale shareholders", she spoke into the microphone.

Kaufmann declared that he no longer had this intent, even though from a strictly legal point of view it remained an option. [...]

Kaufmann invited 11-year-old Ronja together with her parents to visit the factory, in order for her to get know the company, of which she owns a small part, and in order to improve the link between Leica and its shareholders. The company even wanted to shoot a video with the young shareholder.

Last night, the company refused to answer the question whether Ronya's proposed visit and the improved contact with the shareholders had already happened. "No comment" was the only answer; information requests were forwarded to an external communications agency. There, however, little Ronja was entirely unknown. [...]

Even on 19 November, that is 16 days ago, Kaufmann had used the occasion of Blackstone's purchase of Leica stock to declare, regarding the squeeze out: "Currently there are no such plans."

(http://www.mittelhessen.de/lokales/t...aere_raus.html)

Way to go, Leica - invite your 11-year-old shareholders to the company for good PR, squeeze them out a few weeks later!

It looks like what is happening now can be described by the following options:

[_] Andreas Kaufmann has finally decided to be xxxx.
[_] Blackstone culture starts to manifest itself.
[_] All of the above.