Chinese takeover talks for Bang & Olufsen

The end of an era is perhaps near for one of Scandinavia’s most known designer brands: Bang & Olufsen (B&O).

China-based Sparkle Roll Group Limited (“Sparkle Roll”) confirms dialogue about potential public offer for all shares in the company.

Mr. Qi Jianhong, Chairman of Sparkle Roll says: “Sparkle Roll has followed Bang & Olufsen since 2012 and we are enthusiastic about the company. We are excited about the products, its innovation power and the intrinsic value of the unique Danish brand recognised across the globe. We strongly believe that Bang & Olufsen would benefit from a different ownership structure than the present in order for the company to free up resources as well as accelerate growth and consolidation.”

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“As a result, we have explored the possibility of making a public offer for all shares in Bang & Olufsen. However, while we continue working towards being in a position to make a public offer for all shares of Bang & Olufsen several elements remain to be resolved. In any case, a condition for making an offer is that we are comfortable it will be possible for us to acquire all shares in Bang & Olufsen at a price we find reasonable, reflecting the potential of the company but also the significant uncertainty and the investments needed to ensure further development and growth,” he continues in a statement.

Takeover offers were initially announced back in November 2015: “Bang & Olufsen can inform that a dialogue is ongoing with one potential offeror that may or may not lead to an offer for the whole or part of the issued share capital of Bang & Olufsen.”

At that point in time B&O had not entered into any binding commitments.

B&O partnered with Sparkle in 2012 to boost sales in China. Sparkle Roll distributes top-end cars, watches, wine and cigars in China, ranging from Bentleys and Bugattis to 100,000 yuan ($15,000) bottles of French wine.

B&O has also announced in March 2016 a new strategic technology partnership with LG Electronics regarding development and production of Bang & Olufsen’s future TV.

“Bang & Olufsen initiated a review to identify strategic and structural options to increase scale and further reduce complexity within Bang & Olufsen. As a result of this review, Bang & Olufsen has entered a strategic technology partnership with LG, one of the world’s largest producers of TVs and a technological frontrunner with its leading OLED technology and WebOS. The agreement entails that Bang & Olufsen will focus on its unique competencies within design, acoustics and smart home integration within TV development, and combine this with LG’s technological leadership within OLED technology,” writes the Danish company.

The new flagship Bang & Olufsen store at Gaysorn Plaza, Bangkok.

“This partnership with LG will enable Bang & Olufsen to stay at the forefront of innovation in the TV category, a category which is currently undergoing significant change and which is very important to Bang & Olufsen. The partnership will address Bang & Olufsen’s key challenges related to scale and complexity”, says CEO Tue Mantoni.

The partnership will help solve a key strategic challenge as Bang & Olufsen will achieve technological capabilities and scale needed to improve the long-term profitability of the company. The partnership will allow Bang & Olufsen to focus on core competencies within acoustics and design, while further optimising the company’s supply chain, development, production and service.

The first OLED TV produced by LG for Bang & Olufsen as a result of the partnership is expected to be launched in 2017. Further, the partnership involves collaboration in other areas such as license and product bundle activities.

As a consequence of the partnership, Bang & Olufsen expects to improve gross margins and reduce capacity costs. The agreement has an annual savings potential of DKK 150-200m when fully implemented over the next three years.

“As such, the partnership is an important step towards achieving the financial targets set out for 2017/18 of an EBIT-margin of approximately 7 per cent and a positive free cash flow.”

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