Germany's Osram urges investors to accept $4.8 billion AMS offer

VIENNA/MUNICH (Reuters) - Osram OSRn.DE advised shareholders to accept a 4.3 billion euro ($4.8 billion) bid from AMS AMS.S on Monday, bringing the Austrian sensor specialist a step closer to taking over the bigger German lighting group.

FILE PHOTO: The logo of German lighting manufacturer Osram is seen behind light bulbs that are on display at the company headquarters in Munich, Germany, August 27, 2019. REUTERS/Andreas Gebert/File Photo

AMS, best known for supplying Apple AAPL.O with sensors for its latest iPhones, this month offered 38.50 euros per share for the leader in automotive lighting, outbidding private equity investors Bain Capital and Carlyle Group CG.O by 10%.

To reduce dependence on smartphone producers, AMS wants to combine its business with Osram’s to expand in the auto industry and supply manufacturers with sensors and lighting solutions for self-driving cars. It has said it would cut Osram jobs outside Germany, sell its digital business and phase-out its consumer general lighting LED business.

Osram, hit by profit warnings and a weak car market, had initially backed the offer from Bain and Carlyle, which had agreed to maintain it as an independent company with its existing management and to support its strategic direction.

But the Munich-based company said in a statement recommending the offer that “the financial attractiveness of the (AMS) offer was to be weighted higher than points of criticism”.

Despite the recommendation there are still reservations at Osram’s headquarters, dominated by doubts about the long-term business prospects and Osram Chief Executive Olaf Berlien expressed his by saying he would not sell his shares to AMS.

Osram's biggest shareholder Allianz Global Investors ALVG.DE, which holds a 9.4% stake, is prepared to follow the advice, a financial industry source told Reuters.

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“If there aren’t any better options, Allianz Global Investors will tender its shares to AMS,” the source added.

AGI had rejected the bid of 35 euros per share from Bain & Carlyle as too low before AMS’s counterbid. The duo, who have the option to raise their offer, declined to comment on Monday.

The next largest Osram shareholder is Swiss bank UBS UBSG.S with a 6.2% stake. Together with HSBC HSBA.L UBS is providing AMS's 4.2 billion euro bridge financing for the deal.


“We have received the very clear feedback that our investor base as well as new investors are looking towards this transaction with a very positive attitude,” Chief Executive Alexander Everke told journalists in Munich.

To capitalize on the momentum, AMS lowered the acceptance threshold of its offer to 62.5% from the previous 70%.

Everke also tried to allay German trade union concerns regarding far-reaching job cuts, saying that many of the existing jobs were complementary. However, he did not exclude redundancies for operational reasons in Germany.

AMS has to take on billions of debt to finance the takeover, and Osram said paying off the funds could become difficult.

AMS’s dependence on key customers meant “that the financial situation of the combined group may become very strained” if they switched to others or placed fewer orders.

Osram also voiced doubts whether the Austrian sensor specialist, whose number of staff is about a third of that of the German group, will be able to run such a complex takeover.

($1 = 0.9035 euros)

Reporting by Kirsti Knolle in Vienna, Joern Poltz and Alexander Huebner in Munich, Editing by Daniel Wallis, Louise Heavens and Alexander Smith