UPDATE 2-Siemens' Osram to restructure before spin-off -sources

Thu Nov 22, 2012 12:45pm EST

* To cut thousands of jobs, mostly outside Germany -sources

* Siemens board meets Nov. 27, Osram board Nov. 28 -sources

* Osram spin-off prospectus to be published Dec. 7 -sources

* Siemens, Osram decline to comment

By Jens Hack

MUNICH, Nov 22 (Reuters) - Siemens AG's lighting unit Osram is planning a restructuring including thousands of job cuts before it is spun off next year, sources said.

The programme will cost about 500 million euros ($640 million) and will affect mostly sites outside Germany, several people familiar with the matter told Reuters.

Siemens and Osram declined to comment.

Siemens plans to spin off most of Osram, the world's No. 2 player in the 40 billion euro lighting industry after Philips , in the European spring of next year, having scrapped plans for an initial public offering (IPO) on weak markets.

Like its peers, the company has been hit in recent years by a shift from traditional light bulbs to more energy efficient and durable light-emitting diodes (LEDs) and pricing pressure from Asian rivals that can produce more cheaply.

"In the last hundred years the lighting business has been dominated by GE, Philips and Osram. Now new, financially strong providers have joined the game, like LG, Samsung or Cree," said a senior official at Osram, who declined to be named.

Osram, which generates annual sales of about 5 billion euros, has 44 factories in 16 countries and has already shrunk its workforce by 2,000 to 39,000 over the past year.

Analysts estimate the company's value at 3-5 billion euros, but that could change when it publishes details of its finances.

GROWTH AHEAD

Siemens' supervisory board will sign off on the timing and some details of the spin-off at its meeting on Nov. 28, the sources said. The following day, Osram's board meets.

The prospectus for Osram will be published on Dec. 7, along with the invitation to Siemens' annual general meeting on Jan. 23, where shareholders will be asked to approve the flotation.

The sources told Reuters that Siemens plans to keep less than a fifth of Osram while transferring the rest to its own shareholders, having become unwilling to invest in the business to keep up with Asian rivals.

"The LED market will grow significantly. But that also means that one needs to invest a lot. Our parent (Siemens) was not prepared to play that game," the Osram official said.

LEDs are used to for flat-screen televisions and tablet PCs but are also becoming increasingly popular as a source of general lighting, in shops or restaurants or for outdoor displays.

Consultancy McKinsey sees the LED market reaching a volume of almost 65 billion euros by 2020, accounting for close to 60 percent of the overall lighting market. That would make it similar in size to the global market for TVs, it says.

Also, as in other technology industries such as software and smartphones, fierce competition in the LED sector is prompting a flurry of patent suits.

In August, Samsung and Osram settled a more than year-long LED patent battle in a settlement that a source said was "unbelievably expensive" for Osram.

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