Blackstone

[Ecaton]

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There is good and bad news. To survive Leica has to succeed and grow. And to grow it has to broaden its product base to appeal to a greater mass of customers, to reach more market segments and become a globally recognized premium brand of emotional products. Growing means raising funds beyond the companies generated operating cash flows and the means of a family owned private equity fund such as ACM. With Blackstone, funding ambitious growth will be possible, That's the good side of the story. The negatives have already been accurately mentioned by others.

Now for "Leica is only for Pros" or "a real Leica must be manufactured in Germany" obsessed it is definitely bad news. With investors like Blackstone Mr. Nostalgia and Mrs. Emotions will not be invited into the board room.

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[markgay]

Dr Kaufmann needs advisers who are at least the match of Blackstone.

 

Several members have mentioned Southern Cross care homes.

 

Though Blackstone denies it bankrupted the company, what happened is consistent with what I saw Blackstone do to my wife's company:

 

It took a company with no debt, valuable assets and a rich cash flow - and turned it into a beggar.

 

It loaded New Skies Satellites with debt, conducted sale and leaseback arrengements, and transfered all resulting cash to itself and a compliant management.

 

There is no other way to describe what Blackstone did to New Skies Satellites.

 

https://secure.wikimedia.org/wikipedia/en/wiki/Blackstone_Group

 

Blackstone just bought Burger King, it's number two in US shopping mall and it owns Center Parcs UK.. and now almost half of Leica )).

 

I'm going to buy a spare M9, just in case.

[D.H.]

“Leica ist tief in der deutschen Geschichte verankert” - I sincerely hope that the people from Blackstone will always bear this fundamental statement in mind each time they will be involved in making any decisions on the future management and structure of that company. Real world experience during the last 20 years has unfortunately shown but too many times that financials interests and P&L considerations are only rarely compatible with a genuine commitment towards the historic patrimony of a company or a country. And one can certainly wonder whether there would not have been other ways of raising the funds that are necessary for the future development of a company such as Leica AG than a pact with an investment fund. Anyhow, now it is done and time will show where this will take us. In any event, what you should always remember is that all Leica enthusiasts will keep a very close eye on your dealings with “our” company.

[IkarusJohn]

In the BJP article is an assurance that Dr Kaufmann will maintain his majority shareholding.

 

For the company to expand, it will need capital, which will mean either debt (why would Blackstone becoming a shareholder mean better access to debt? unless, or course it's cosec, related party borrowing with very high fees to the arranger - Blackstone), or further rights issues. That may be where Dr Kaufmann is spending the proceeds of the sale of his 44% stake.

 

The problem for small companies wanting to become larger companies, or to increase market share, is that the original owners struggle to meet the capital requirements. With luck Dr Kaufmann will be using the proceeds of the sale of his shares to meet further capital requirements to maintain his majority shareholding, and majority on the Board.

 

Cheers

John

[Jeff S]

 

Kodak sensors are vital for the M9 and S2, and probably their siblings now in development. For Leica the "doomsday" scenario is that a competitor buys Kodak's sensor division and discontinues outside sales. Leica cannot take a chance that such an acquisition might occur. It would kill the company, and that is a doomsday scenario that is all to real for Leica. I predict that Dr. Kaufmann will use this money to make a bid for Kodak's sensor division.

 

Kodak likely first choice, but what about DALSA?

 

Jeff

[StephenPatterson]

Kodak likely first choice, but what about DALSA?

 

Jeff

 

For a company the size of Leica it is a very difficult and expensive proposition to change existing product lines or development projects based around the Kodak sensors. Not impossible, but very difficult and expensive.

 

DALSA could potentially be an alternative to Kodak to supply sensors, but what would the price be in terms of time, money, resources with no guarantee that Teledyne might not spin them off in the future. You can say the same about Foveon and Sigma.

[Jeff S]

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For a company the size of Leica it is a very difficult and expensive proposition to change existing product lines or development projects based around the Kodak sensors. Not impossible, but very difficult and expensive.

 

I understand, but that's different than your initially saying "it would kill the company."

 

Jeff

[mjh]

Now for "Leica is only for Pros" or "a real Leica must be manufactured in Germany" obsessed it is definitely bad news.

Oh, come on … Leica has been targeting the amateur market mainly; the S2 was the first bona fide pro camera for quite some time. Also “real Leicas” started to be üartly manfactured in Portugal more than 30 years ago. So this is hardly news.

[markgay]

A classic LUF wild goose chase, all this earnest debate about L buying Kodak.

 

Blackstone buys and sells. It turns a profit. That's all it does. Follow the money.

 

Even if Blackstone had in mind a deal with Kodak, it would be looking at a much bigger market than that for Leica cameras.

[Gentleman Villain]

This could be preparation for a decline of the Euro and US dollar in 2012

 

Looks like somebody might be trying to get out of as much paper as possible, while still maintaining control.

 

Too Big To Fails will get bailed out by the Federal reserve no matter how bad their investments might be. It's all about control. There is no free market and the monopoly money is all fake anyway.

[StephenPatterson]

I understand, but that's different than your initially saying "it would kill the company."

 

Jeff

 

Sorry Jeff, let me clarify.

 

If Nikon bought the sensor division of Kodak and decided to stop selling sensors to competitors it would kill Leica.

 

If Leica decided to drop Kodak and migrate to a new family of sensors it would be difficult and expensive, and might possibly kill the company if there were too many bumps in the road.

[Ecaton]

Oh, come on … Leica has been targeting the amateur market mainly; the S2 was the first bona fide pro camera for quite some time. Also “real Leicas” started to be üartly manfactured in Portugal more than 30 years ago. So this is hardly news.

 

I think you missed the cynicism in my last statement.

[mjh]

If Nikon bought the sensor division of Kodak and decided to stop selling sensors to competitors it would kill Leica.

It would also kill or endanger the greater part of the MF industry. But why should they do that? Nikon had no use for Kodak CCDs and the vendors endangered by this move aren’t competing with Nikon anyway.

 

If Leica decided to drop Kodak and migrate to a new family of sensors it would be difficult and expensive, and might possibly kill the company if there were too many bumps in the road.

It’s doubtful whether Leica was ever considering Kodak as the supplier of the M10 sensor. The S2 series might be the only one really affected by whatever happens to Kodak.

[StephenPatterson]

Nikon had no use for Kodak CCDs and the vendors endangered by this move aren’t competing with Nikon anyway.

 

No use that we know of today, but who's to say what Nikon's strategic plans are for the next 5 to 10 years.

 

It’s doubtful whether Leica was ever considering Kodak as the supplier of the M10 sensor. The S2 series might be the only one really affected by whatever happens to Kodak.

 

Writing software for a new sensor architecture is very difficult. Sensors from different manufacturers are not simply "plug and play" and there would be a significant learning curve, not to mention teething pains and numerous timing bugs to be worked out with no guarantee that issues might not creep up in a released product. The M8 UV/IR debacle is still very much remembered in Solms. I'm in the camp that thinks the M10 will be evolutionary and not revolutionary.

[mjh]

Writing software for a new sensor architecture is very difficult. Sensors from different manufacturers are not simply "plug and play" and there would be a significant learning curve, not to mention teething pains and numerous timing bugs to be worked out with no guarantee that issues might not creep up in a released product.

Thus my guess that they might have never considered Kodak in the first place. Planning with a Kodak CCD while actively considering switching to CMOS eventually would be a bad idea for exactly the reason you’ve mentioned. Not to mention that a full-frame transfer CCD and a CMOS sensor have quite different capabilities, suggesting significantly different feature sets.

[StephenPatterson]

Thus my guess that they might have never considered Kodak in the first place.

 

I am also in the camp that do not expect Leica to use a CMOS sensor in the M10 for reasons that have been stated numerous times in numerous threads on this forum, but I respect your viewpoint that the opposite is possible and perhaps probable.

[antd]

The comparison has been made before but it's worth making again: Leica is like Apple.

 

More particularly, Leica is like Apple circa 2001.

 

They have: a great and longstanding brand, a small but absurdly loyal fan base (all of us!), a commitment to quality and design and one or two killer products (think the first iMac and first gen iPod) that are just starting to break out into the wider market. And a reputation (deserved or not) for being "expensive"!

 

Now, Leica have already started to take a few leafs out of the Apple playbook. Think of those product launch presentations. And now starting to roll out the retail stores.

 

I think Leica is now uniquely positioned to go huge - just like Apple was ten years ago - and, like Apple, not lose its "DNA" in the process.

 

But to do that it needs capital, it needs management savvy and it needs the execution skills and expertise to run a global operation. It needs to exploit its brand. It can't be in the ridiculous position where people want to buy its products but they just can't get them because Leica can't produce them fast enough. (It needs a Tim Cook!)

 

THIS is the opportunity that Blackstone have seen, and I hope they can help Leica execute on it.

 

As a Leica fan I, for one, am excited at what this development will bring.

[photolandscape]

The good news is it's new investment.

 

The bad news is, IMHO, they will be looking for the maximum return on their investment, most likely above all else, whatever that means for the business as we know it today. It's not too difficult to imagine an outside investor wanting to maximize the brand, so maybe we will see many more cheap Leica branded digicams down the line.

 

I would suggest that a stronger wind of change will be blowing through Solms in the coming years. Is this part of an exit strategy by Dr Kauffman?

 

This news is like a bad dream.

 

The good news is, yes, it's new investment--but with a significant price. This is all about return on investment (ROI). Everything else will be subsumed to the relentless demand for maximizing ROI.

 

As someone who has witnessed many such deals, unless someone at Blackstone in control of the relationship is benevolent (sort of an oxymoron in this case) and has a real grasp on Leica's many attributes and respects and builds upon what makes Leica unique, we may be in for some ill winds. I have no doubt that they will want to see a rapid expansion into more cheap Leica-branded products, exploitation of Leica's attributes, more automation, and always higher profits. Although I found Leica to be stodgy and a bit difficult at times, until today I never appreciated Dr. Kauffmann's leadership enough. I hope he stays on. The minute Blackstone takes over a majority of Leica, the power will reside totally in their hands. All in all I consider this a momentous, and I am afraid, sad day for Leica. In the end it's going to be all about ROI first and foremost. Everything else is secondary.

 

On a hopefully unrelated note, I did see that Martha Stewart is talking with Blackstone, hoping to get an investment infusion.

 

I can just see it now--a Martha Stewart/Leica co-branded camera line. For now I think I'd better put that out of my mind.

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[rosuna]

I

"The US private equity concern financed its purchase completely with its own capital, said Herberg--that is also unusual."

 

So Blackstone provided pure cash. That seems to be the reason.

[photolandscape]

The good news is it's new investment.

 

The bad news is, IMHO, they will be looking for the maximum return on their investment, most likely above all else, whatever that means for the business as we know it today. It's not too difficult to imagine an outside investor wanting to maximize the brand, so maybe we will see many more cheap Leica branded digicams down the line.

 

I would suggest that a stronger wind of change will be blowing through Solms in the coming years. Is this part of an exit strategy by Dr Kauffman?

 

I have been on the receiving end (the company bought, like Leica in this case) of these things one or two times too many. If we're lucky, the Blackstone person managing the Leica investment is a benevolent soul who has a couple of M9's, an S2, a new Noctilux and a half-dozen other pieces of Leica glass and respects Leica's many virtues and is therefore less prone to throw out the good while ringing in the new.

 

I would expect production to increase substantially, and perhaps more automation/fewer white coats in manufacturing down the road. If quality is maintained or increased, might not be an altogether bad thing. I see a lot more digicams down the road, if the Leica name can attract more profitable sales.

 

If and when Dr. Kauffmann elects to give up his majority interest--it's a whole new ballgame. There is always a price when money is borrowed.

 

On a most encouraging note, I read today that Blackstone is talking about making a major investment in Martha Stewart. What a great opportunity that could be--a co-branded M9 or M10--the Martha Stewart/Leica all decked out in Martha's current color palette.