Leica Camera Focuses on Initial Stock Sale
Leica Camera AG hopes that investors will respond to its initial public offering of 3.5 million shares this month as enthusiastically as photography buffs embrace its products.
The Solms, Germany-based maker of cameras, lenses, and field glasses has developed such a reputation for quality that legions of photographers, from the amateur to such world-renowned photojournalists as Henri Cartier-Bresson, have been willing to pay a premium for Leica’s flagship product, the M6 camera, which now retails for more than 7,000 deutsche marks ($4,730). And it doesn’t even have automatic focus.
“Saying you have a Leica is like saying you have a Rolex watch,” said Veronika Hass, an amateur photographer who has used a Leica M6 for six years. “But quite simply, it is a great camera--reliable, simple, classic.”
And it’s Leica’s dedication to quality and technical excellence that Chief Executive Klaus-Dieter Hofmann believes will ensure its success as a public company.
“We know we are a niche company, and a major reason for going public is to enable us to concentrate on improving our products in this niche,” Hofmann told journalists. “We see the niche role as an advantage because it makes us less dependent on the economic situation.”
Yet Leica Camera also recognizes the danger of being in a niche market--rising production costs and shrinking markets--which is why it has more than tripled spending on research and development since 1988. The company plans to use proceeds from the share sale to expand product lines and seek out new markets.
“The sale will enable [us] to build on our reputation for optical excellence in developing a series of new products,” Hofmann said.
Leica Camera AG said it will sell up to 3.57 million shares in its initial public offering at a price between 40 to 47 deutsche marks ($27 to $32) per share, with 3.1 million earmarked for the initial sale and an additional 450,000 available if demand warrants it.
The sale in that range would raise up to from 143 million marks ($96.6 million) to 168 million marks ($113.5 million).
Of the 3.1 million initial total, 700,000 shares will be new shares, bringing up to 33 million marks ($22.2 million) in new equity into the camera maker. The current owner of Leica Camera, Leica Technologie AG of Switzerland, will sell 2.4 million shares.
The additional allotment, known as a “green shoe option,” would comprise 200,000 new shares and 250,000 existing shares from Leica Technologie.
The final price will be determined Sept. 12 after canvassing potential investors in a so-called book building process, the camera maker said. Leica Camera shares will begin trading on the Frankfurt Stock Exchange Sept. 19.
“Everyone knows it is the brand,” said Josh Waiblinger, an institutional advisor in equities at BHF-Bank AG in Frankfurt. “The brand name is well-known, but it is difficult to judge the figures as there is so little expertise.”
Leica plans to unveil several new camera models as well as new electronic imaging products later this month at the Cologne Photokina, the world’s largest photography fair, Hofmann said.
In April, Leica Camera acquired the production facilities and brand name for Minox, another famous German camera.
The company has sought to reduce production costs by outsourcing and shifting component production to Portugal to reduce labor costs, measures that will enable sales and pretax profit to increase by at least 10% in 1997 and 1998, the company said. Pretax profit in fiscal 1996 rose more than 15% to 11.7 million deutsche marks ($7.9 million) on sales of 239.9 million marks ($162 million).
The company is also focusing on the Far East as a growth area. Sales in Germany, currently Leica’s largest market, are expected to fall to 38% of total sales by 1999 from 47% in 1994. Sales in the Far East, by comparison, have doubled to almost 20% of group sales in the last two years, and are expected to comprise 24% of total sales by 1999.
Saint Gallen, Switzerland-based Leica Technologie AG, which produces lenses for the medical and biotechnology industries and currently owns 91% of the company, will retain 20% of Leica Camera. Leica Camera’s management will hold 7.5%. If the green shoe option is exercised, Leica Technologie’s stake would sink to 13.6% and management’s share to 7.2%.
“Leica’s move to the stock market has been in the planning stages for a while,” said Marcus Fuetterer, a corporate finance manager at Westdeutsche Landesbank Girozentrale in Dusseldorf. “The parent has a high level of industrial interests, while Leica Camera is more concentrated on the private sector, so there was little synergy between the two. It is a good reason to make the spinoff, and Leica Camera’s in a good position to do so.”
Union Bank of Switzerland and Westdeutsche Landesbank Girozentrale are acting as joint global managers for the Leica Camera sale. Commerzbank, Trinkaus & Burkhardt, BZW and Robert Fleming are co-managers.
