Sensor specialist AMS AG has failed to conclude a US$4.9 billion takeover of Osram Light AG. AMS said it had received the support of 51.6% of Osram shareholders, below the unconditional acceptance level of 62.5%. AMS nonetheless remains the largest single shareholder in Osram, having knocked Allianz Global Investors out of the top spot last month by increasing its share to 19.9%.
In late September, AMS announced it was raising its previous all-cash offer to US$45 (€41) per share, or US$4.9 billion (€4.5 billion). Presented as its “best and final” offer, this move could have ended a months-long bidding war with private-equity rivals. The revised AMS bid came two days after a consortium comprising Advent and Bain Capital announced an intention to offer a “meaning- ful premium over the current offer from AMS” of US$42.2 (€38.5) per share, or US$4.7 billion (€4.3 billion). Private-equity firms Bain Capital and The Carlyle Group previously had submitted an offer for US$38.4 (€35) per share, but Allianz, Osram’s largest shareholder at the time, rejected it as too low.
Dimitrios Damianos, a tech market analyst with Yole Développement (Lyon, France), said AMS had upped its bid “in order to acquire Osram because it is critical for them to leverage their time-of-flight sensors by using Osram’s existing portfolio and clients. Their [AMS’s] time-of-flight is now used for face recognition in smartphones, and they want to differentiate by entering the lighting market that Osram can offer.”
BEST AND FINAL?
Was the rejected bid really AMS’s best and final offer? Maybe not, as it later stated that it “continues to view the combination of AMS and Osram as strategically compelling” and declared its intent “to explore strategic options to pursue the acquisition of Osram.”
“Our goal is to create a global leader in sensor solutions and photonics, based on European technology,” Amy Flécher, vice president of marketing communications at AMS, told EE Times Europe. Stressing the complementary nature of the two businesses, she added that “Osram is the leader in visible and invisible light emitters, and aspires to develop IC design, optics, and optical packaging capabilities,” while “AMS is in IC design, optics, and optical packaging capabilities, and aspires to add a leadership position in emitters.”
An underlying reason for the takeover bid is that AMS is heavily reliant on a single customer: Apple. Acquiring Osram would expand AMS’s business and diversify its revenue mix. In the first half of 2019, AMS’s consumer business accounted for 75% of its total revenue, while the automotive business and industrial and medical business accounted for 10% and 15%, respectively. The long-term goal is to generate 35% to 40% revenue both in the automotive and consumer businesses and 20% to 30% in the industrial and medical business. The expected revenue growth, Flécher said, “is driven by content opportunities, not volume growth, and we see it in our consumer business and in automotive going forward.”
If an acquisition eventually goes through, “both companies would need to step up R&D investments to build the complementary required capabilities,” Flécher said. She then switched from the conditional to simple future tense as she added: “The combination of the businesses will drive R&D efficiency, and the targeted solutions will be brought faster and more efficiently to market, as existing strengths can be leveraged immediately to win in breakthrough optical solution areas.”
Because the initial bid raised concerns among unions and workers’ representatives, AMS had outlined commitments in its latest offer to safeguard Osram’s 27,400 employees and production facilities in Germany. “There is a corporation agreement with some paragraphs with protective clauses regarding German sites and employees,” said Torsten Wolf, head of core communications at Osram.
Pledging AMS’s good intentions, Flécher said its latest bid had offered “extensive commitments in line [with] or better than other proposals on the table and [included] an integration plan. Our plan sees a build of jobs in Germany, particularly in Regensburg.” To finance the bid, AMS said it had secured US$4.84 billion (€4.4 billion) in loans from UBS, HSBC, and Bank of America Merrill Lynch. AMS also said it intended to raise US$1.76 billion (€1.6 billion). ■