MLS and Forest Lighting Look to Future with Osram

MLS and Forest Lighting Look to Future with Osram

Osram, Sylvania, Ledvance, Forest, MLS: Acquisition will pose branding challenges

As Chinese lighting giant MLS Co., Ltd. moves toward closing its recently announced acquisition of the Osram lamps business, the opportunities this acquisition creates in production efficiency, intellectual property and market reach are clear wins for the buyer. Sorting out the alignments among the many brands involved will pose a bit of a puzzle.

MLS, based in Zhongshan, China, is part of a consortium with strategic investor IDG Capital Partners and the financial investor Yiwu State-Owned Assets Operation Center that has agreed to acquire Osram’s general lamps business for over €400 million (about $442 million). Sweetening the pot for Osram, the deal also includes annual payments for license agreements on trademark rights.

Best known in the North American market for its Forest Lighting brand, which has been making inroads over the past couple of years in the electrical distribution market, MLS is one of the largest manufacturers of LED lighting for the consumer market in China.

It’s far too early, with the deal expected to close late this year or early in 2017, to see how the acquisition will change things in the U.S. market. The lead voice for MLS in this market, Jian Ni, chief operating officer of Forest Lighting USA, Atlanta, is enthusiastic about its potential impact, particularly in the extensive nationwide distribution network Osram Sylvania has established.

Ni has been barnstorming distributor conferences and trade shows in the company of lighting industry communications veteran Doug Baillie, meeting distributors and building respect for the Forest brand, and that quest will continue.

“Everything we’ve done so far, marketing and brand-building, has been very successful. While we’re waiting for closure of this deal we will continue developing our channels,” Ni told Electrical Marketing in a phone interview. “Once the two entities move together we will maintain a dual brand strategy. It will still be Sylvania under Ledvance and Forest Lighting under MLS. Until then we will work to have a clear picture of how to leverage the brands on both sides.”

The Osram business lines included in the acquisition were rebranded as Ledvance last year shortly after parent company Osram was spun off from Siemens. A diagram on the Osram website shows the intent to establish Ledvance as the brand selling through distribution while Osram (and Sylvania in the U.S.) would focus on consumer and end-user markets.

There are some precedents for MLS to keep all those brands in circulation over the long run. The market value of the Osram brand internationally may be indicated by the fact that of all the acquisitions Siemens has made in recent times, Osram is one of the few it never replaced with its own name. Similarly in the U.S., when Siemens/Osram acquired legendary U.S. lighting brand Sylvania it kept that name alive.

Another interesting aspect of the deal to keep an eye on is how MLS will handle pre-LED traditional lighting technologies. MLS has only ever made LED lighting, so incandescent, fluorescent, HID and halogen bulbs that come along with Osram’s Ledvance package will create some learning opportunities.

“MLS strictly an LED lighting products company,” Ni said. “We have not been in any of the traditional lighting side of business. Personally, I see it evolving as the market’s need for these products change. We’ll provide the products the customers need until that need goes away.”

Apart from branding and channels to market, one of the biggest advantages of the MLS-Osram combination is the opportunity to combine Osram’s deep intellectual property holdings with MLS’s high-capacity low-cost production operations. Osram recently built a new LED production plant in Malaysia that will provide LED chips to MLS.

“In connection with the transaction, Osram and MLS entered into a strategic supply agreement, by which MLS intends to purchase an annual order of LED chips from the new plant in Kulim, Malaysia, once production has started,” Osram said in a press release.

 “The advantage of that is we can leverage a lot of the patents and intellectual property that Osram Sylvania has and that will really help us get into the international market,” Ni told EM.

In MLS, Ledvance joins a huge and rapidly growing LED lighting manufacturer. Founded in 1997, the company now ranks among the top 10 LED manufacturers in the world, with 10,000 employees worldwide, revenue over $1 billion and capacity exceeding 16 billion units annually.

In the U.S., Forest Lighting has seen rapid growth with revenue in this market growing 50% year over year in 2016, though from a low base. Ni is eager to see that growth continue.

“We want to assure our customers and distributors that Forest Lighting will still be here, and will continue to support existing customers and develop relationships with new customers,” Ni said.

 

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