Osram said on Monday it would consider a takeover by Austrian sensor maker AMS that trumps a competing bid by Bain and Carlyle with a cash offer valuing the German lighting group at €4.3 billion (US$4.8 billion).
AMS said it could create a global heavyweight in sensors and photonics with the acquisition of Osram, a leader in automotive lighting technology whose share price has been depressed by profit warnings, doubts over its strategy and a weak car market.
Osram called AMS's financing plan "binding and viable". It added that a stable environment for its high-tech transformation was important, as well as the protection of company employees.
The offer would beat Bain Capital and Carlyle's €4 billion bid that had been recommended by Osram's boards but slammed as too low by its biggest shareholder Allianz Global Investors.
AMS is keen to diversify into sensors for self-driving cars as it works to reduce its dependence on Apple, which analysts estimate accounts for around 40 percent of revenue.
"The transaction is strategically compelling as it creates the global leader in sensor solutions and photonics for consumer as well as automotive, industrial and medical applications," said AMS Chief Executive Alexander Everke.
"Together we will command the broadest portfolio of optical sensing and photonics in the industry," he said on a conference call on Monday.
Osram's shares jumped by as much as 12 percent earlier in the day, briefly surpassing Bain and Carlyle's offer of €35 a share but remaining below AMS's offer of €38.50 . They closed up 10.4 percent at €34.95.
Shares in Swiss-listed AMS fell 11.8 percent, with Vontobel analysts saying the transaction would raise AMS's risk profile and value creation would be highly dependent on synergies, which AMS expects to exceed 300 million euros a year.
AMS's planned bid is backed by a €4.2 billion bridge loan facility underwritten by UBS and HSBC, which AMS plans to refinance by issuing debt and equity, including raising €1.5 billion of new equity.
A spokesman for Bain and Carlyle declined to comment.
Investor unease
AMS previously showed interest in Osram in June, signing a confidentiality agreement in order to gain access for due diligence. That included a clause under which AMS would not make another takeover attempt on Osram within 12 months. Back then, AMS did not make an offer, backpedalling within days as it did not have sufficient financing.
With financing now in place, AMS has given Osram until Aug. 15 to waive the standstill agreement and said it would then make a formal bid. Osram said that it would waive the agreement if negotiations were successful.
Analysts have previously questioned the logic of AMS's interest in Osram, saying it would have to carve out or sell Osram's non-semiconductor operations for a deal to make sense.
They also have voiced concern about the Austrian group's debt and the difficulty of diversifying from Apple amid fierce competition, global trade tensions and rapid technological developments.
Investors' unease is reflected in AMS' share price, which is 30 percent lower than a year ago.
The influential IG Metall union, which had welcomed the Bain and Carlyle offer, criticised AMS for its on-and-off approach, saying it hurt the sensor maker's credibility.
Sensors for cars
AMS aims to overcome those concerns by beefing up its auto business. It already develops sensors that can help map roads and control gear shifters and chassis in autonomous vehicles. It said a year ago it was engaging with "a global pioneer in autonomous driving platforms", and has repeatedly stressed that interest from the sector was rising.
Osram applies LEDs and laser chips to lock and unlock cars. It took a stake in Recogni, a Silicon Valley start-up that specialises in artificial intelligence for driverless cars earlier this month.
AMS aims to increase the automotive business's revenue share to 35-40 percent if the total from 10 percent currently if it acquires Osram.
To streamline production and avoid overcapacity, the Austrian group plans to shift Osram's LED production from Asia to Germany's Regensburg. That does not necessarily imply that Osram's billion-dollar factory in Malaysia's Kulim will be shut down, an AMS spokeswoman said. AMS would rather see whether it can use the facility for other products.
The Austrian company said it would gradually phase out the consumer general lighting LED business, which the Kulim factory was built to service.
AMS said it sees Osram's digital division - part of Osram's attempt to become a high-tech group - as non-core, adding that it would seek "the best owner" for the division.
