Sensor specialist AMS AG failed to conclude the $4.9 billion takeover of Osram Light AG.

AMS said it has received the support of 51.6 percent of Osram shareholders, below the unconditional acceptance level of 62.5 percent. AMS, however, remains the largest shareholder with 19.9 percent share of Osram.

A week ago, AMS announced it had raised its previous all-cash offer to $45 (€41) per share, or $4.9 billion (€4.5 billion). Presented as its “best and final” offer, this move could have ended a months-long bidding battle with private equity rivals.

AMS' latest offer indeed occurred two days after a consortium comprising of Advent and Bain Capital clearly expressed their intention to offer a “meaningful premium over the current offer from AMS” of $42.2 (€38.5) per share, or $4.7 billion (€4.3 billion). Private equity firms Bain Capital and The Carlyle Group had previously submitted an offer for $38.4 (€35) per share, which Osram’s largest shareholder Allianz Global Investors rejected as too low.

Asked to comment on AMS takeover offer, Dimitrios Damianos, technology market analyst with Yole Développment (Lyon, France), said: “They made a big 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 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 it really AMS' best and final offer? Maybe not, as it stated on Friday it “continues to view the combination of AMS and Osram as strategically compelling” and “to explore strategic options to pursue the acquisition of Osram.”

Complementarity

"Our goal is to create a global leader in sensor solutions and photonics, based on European technology,” Amy Flécher, vice president marketing communications, AMS, told EE Times. Stressing the complementary nature of the two businesses, she added: “Osram is the leader in visible and invisible light emitters, and aspires to develop IC design, optics & optical packaging capabilities”, while “AMS is in IC design, optics & 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 its business and diversify its revenue mix. In the first half of 2019, AMS' consumer business accounted for 75 percent of its total revenue, while the automotive and industrial & medical businesses accounted for 10 and 15 percent, respectively. The long-term goal is to generate 35-40 percent revenue both in the automotive and consumer businesses and 20-30 percent in the industrial & medical business.

AMS revnue mix

(Image:Source: AMS)

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 the acquisition goes through, “both companies would need to step up R&D investments to build the complementary required capabilities.” But, shifting from conditional tense to active tense, Flécher said, “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.”

Commitments

Because the initial bid raised concerns among unions and workers’ representatives, AMS 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, Osram.

Pledging AMS good intentions, Flécher said its latest bid offered “extensive commitments in line or better than other proposals on the table for this and has an integration plan. Our plans sees a build of jobs in Germany, particularly in Regensburg.”

To finance the bid, AMS said it had secured $4.84 billion (€4.4 billion) in loans from UBS, HSBC and Bank of America Merrill Lynch. In addition, AMS said it intended to raise $1.76 billion (€1.6 billion).