China Everbright, IDG complete controversial Osram deal

The transaction for a unit of the German lighting company Osram was on hold for nearly five months following increased scrutiny from German and US authorities.

After a regulatory delay of nearly five months, a consortium of Chinese investors including private equity firm China Everbright Limited (CEL) and venture capital firm IDG Capital Partners has completed the acquisition of the LED unit of German lighting company Osram, according to a statement.

In July last year Osram agreed to sell LEDvance to a group of Chinese buyers that also included lighting company MLS and financial investor Yiwu State-Owned Assets Operation Center (Yiwu) for over €400 million. The sale was, however, stalled by the German government in October, saying at that time that it needed to “examine the deal as part of its standard procedure” but declined to add further details.

Media reports indicated that during the review, the Chinese consortium headed by IDG was asked to submit documents to prove its acquisition of the company does not breach national security rules related to highly sensitive technology.

Osram received approval from the German authorities in January and a month later got the green light from the Committee on Foreign Investment in the United States (CFIUS), which reviews foreign direct investments in the US, as well as China’s State Administration of Foreign Exchange. US approval was needed because parts of the LEDvance were based in the US.

Chinese investors’ overseas deals have come under greater regulatory scrutiny at home following China government capital control measures and German politicians' calls for more power to screen deals from international investors to prevent German and European high-tech companies selling out to foreign investors. In June last year Germany's economy minister and vice chancellor Sigmar Gabriel called for a Europe-wide measure to block foreign takeover of high-tech firms deemed strategic to the region's economic success.

The deal was structured through Everbright-IDG Industrial Fund, a vehicle launched by CEL and IDG in June last year targeting $3 billion.

CEL and IDG have so far raised 15 billion yuan ($2.2 billion; €1.8 billion) in less than a year, and have since made 10 investments focused on financial technology, high-end manufacturing, entertainment, education and consumption grade. Among its investments include the Shanghai Film Art Academy, which aims to bring Chinese entertainment to international markets, as well as video entertainment brand iQIYI.

LEDvance is a subsidiary of Osram and is of the world's leading providers of lamps for professional users and retail customers. The company offers advanced LED lamps as well as a wide range of traditional light sources, standardised luminaires and connected lighting solutions in more than 120 countries. LEDvance recorded revenue of €2 billion in 2015, accounting for 40 percent of Osram’s revenue.

Hong Kong-based CEL manages over $8.5 billion of assets across 33 funds. San Francisco-headquartered IDG was one of the first foreign venture capital firms to enter the Chinese market, the firm has $8 billion in assets under management.