Osram shares drop after top investor rejects 3.4 billion takeover offer

MUNICH (Reuters) - Shares in Osram OSRn.DE dropped on Thursday after the German lighting group's biggest shareholder Allianz Global Investors rejected a 3.4 billion euro ($3.8 billion) takeover offer from private equity firms Bain and Carlyle CG.O.

FILE PHOTO: Logo of lamp manufacturer Osram is pictured during official opening of the company 'World of light' showroom in Munich, Germany, October 24, 2017. REUTERS/Michaela Rehle/File Photo

AllianzGI, which owns a 9.3% stake, said on Wednesday Osram shares were worth more than had been offered and it was not inclined to accept the bid, despite the board of management and supervisory board recommending it to shareholders.

Osram shares were down 8.4% at 0739 GMT. Struggling with automotive industry weakness and a broader economic slowdown, Osram has seen its stock lose more than 60% of its value since hitting a high of 79.58 euros in January 2018.

“AllianzGI finds it regrettable that they appear to have insufficient confidence in the business they are managing that they have chosen instead to sell out at what looks to be a knock-down price,” the money manager said.

Christian Hinderaker, analyst at Liberum, said: “We continue to see value in the shares, which we believe underappreciate the FCF (free cash flow) turnaround taking place at the business.”

He said he expected that turnaround to lift Osram’s earnings, thereby enabling more acquisitions in the high-growth Internet of Things and sensor markets.

Bain Capital declined to respond to AllianzGI’s comments.

AllianzGI’s statement is a setback for Bain and Carlyle, which will want a minimum acceptance of 70 percent of the outstanding shares when the offer period is expected to conclude on Sept. 5. By last Friday, only 0.9% of shares had accepted.

Osram’s managing and supervisory boards had said on July 4 they were backing the offer, pitched at 35 euros a share, a 21% premium to Osram’s share price before the approach was made public.

AllianzGI said an independent opinion it commissioned suggested Osram shares were worth more than the 35 euros per share currently on offer.

One trader said: “A significantly higher bid seems unlikely. But AGI’s statements must also be due to their high entry price in the shares.”

When AllianzGI took its stake above 5% in 2017, Osram shares were trading at 67 euros. And when it raised the stake again late last year, they were trading at about 40 euros.

Osram’s management said last month the private equity groups were committed to the company’s growth strategy and had made “extensive commitments” about employees and locations.

Last week Osram posted a loss in the fiscal third quarter and said it did not see its markets recovering significantly in the short term.

Reporting by Alexander Hübner; Writing by Emma Thomasson and Michelle Martin; Editing by David Holmes