December 9, 2019 / 8:27 AM / 2 months ago

Osram shares surge as investors bet on higher AMS offer for remaining stake

VIENNA (Reuters) - Speculation that sensor specialist AMS (AMS.S) could make a higher offer to remaining Osram (OSRn.DE) shareholders to persuade them to sell propelled the German lighting group’s stock to a 17-month-high on Monday.

FILE PHOTO: The logo of German lighting manufacturer Osram is illuminated at the company's headquarters in Munich, Germany, September 16, 2019. REUTERS/Andreas Gebert

Osram shares gained as much as 15.4% to 44.44 euros after AMS said on Friday it had succeeded in its second 4.6 billion euro ($5.1 billion) attempt to take over Osram. Zurich-listed AMS stock was 4.6% lower at 46.18 Swiss francs at 1438 GMT.

The concrete result of the takeover is expected to be published on Tuesday.

AMS, which wants to combine its expertise in sensors with Osram’s in lights and develop package solutions for self-driving cars and smartphone applications, failed with a first offer at the same price of 41 euros per Osram share in October. It lowered the acceptance rate to 55% in its second attempt from the 62.5% threshold it missed earlier.

“Osram’s shares seem to be driven by speculations about a significant higher offer to remaining shareholders at a later time,” a trader said.

German law allows for courts to determine that minority investors be compensated at a higher price for their shares when an acquirer and a target company strike a so-called domination agreement. This regularly prompts hedge funds to hold back shares aiming to benefit from a deferred sale.

DOMINATION AGREEMENT

Traders said the market had been uncertain whether AMS would be successful this time, as hedge funds were said to hold around a third of Osram shares days before the offer period expired on Thursday.

In a last minute attempt, Chief Executive Alexander Everke traveled to New York and London last week to meet investors.

“Obviously he managed to convince enough hedge funds that they have nothing to win if they do not tender at least part of their stakes,” a trader said, adding: “AMS not disclosing the acceptance level on Friday suggests a relatively modest acceptance rate.”

To secure control of Osram’s cash flows, which AMS needs to pay back the 4.4 billion euros in new debt it took on for the deal, it needs a domination agreement.

AMS will wait and see how many shares will be tendered by the end of the extended period expiring on Dec. 24, a company spokesman said. The final stake would be communicated early January.

Once that is clear, further proceedings will be determined, he said.

The AMS takeover bid was met with scepticism from the outset, with investors questioning its ability to integrate a company with more than twice its revenue and nearly three times as many employees.

Timm Schulze-Melander, industrials specialist at research house Redburn, said investors’ hope for a premium could turn out to be unfounded. “I don’t see that AMS has either the firepower or desire to raise its stake in Osram by bidding above 41 euros a share,” he said.

Reporting by Kirsti Knolle, Francois Murphy; Additional reporting by Thomas Seythal; Editing by John Revill and Emelia Sithole-Matarise

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