Takeover battles can often take a strange turn, but the €4.5bn takeover of Osram is one of the strangest.
For those who haven’t been following it, here’s a recap of the story so far.
Back in July, U.S. buyout groups Bain Capital and Carlyle Group CG, +2.00% teamed up to make a joint €35-a-share bid for Osram OSR, +0.20%, the German lighting technology group which was spun out of Siemens in six years ago.
That flushed out surprise counter bidder AMS AMS, -5.00%, the Austrian sensor specialist, which swooped in with an bid that was 10% higher at €38.50-a-share. To finance its acquisition, AMS has secured a €4.2bn bridge loan. That would push net debt in the merged group to an alarming 4.3 times earnings before interest, tax, depreciation and amortization (EBITDA).
But money talks. The board of Osram made a peculiar recommendation—reluctantly advising shareholders to accept AMS’ bid, while simultaneously criticizing its ability to integrate the acquisition or extract €300m of promised synergies.
In fact, Osram’s chief executive had such little faith in the viability of AMS’ bid that he refused to sell them his stake.
This created an opening for Bain which wanted to outbid AMS. Its partner, Carlyle, however didn’t. Undeterred, Bain ditched Carlyle and replaced it with rival Advent International. The pair then dangled the prospect of making a new takeover bid with a “meaningful” premium in front of Osram’s board. What that was, no one knew.
Osram shareholders were excited. Surely, this had the makings of an electrifying bidding war.
So why all the fuss? After all, a string of profit warnings and a slumping stock price, meant Osram didn’t exactly have the hallmarks of a prime asset, but both AMS and the buyout groups were betting on the anticipated boom in autonomous vehicles. In particular, they wanted to get their hands on Osram’s Lidar sensor technology, a key component in driverless cars that can measure distance.
The mere prospect of a rival bid from Bain and Advent sent AMS led the Austrian company to sweeten its offer to €41 a share and splurge €600 million buying up a 19.99% stake to try to thwart the still non-existent counter offer.
That wasn’t enough to secure the deal. Only 51.6% of Osram investors backed AMS’s offer — short of the 62.5% acceptance threshold it needed. Opposition from unions in Munich, concerned about potential job losses, didn’t help either.
AMS wasn’t about to give up. As the largest shareholder in Osram, it could now dictate the terms of the deal. On Friday, it launched a new bid — equal to its previous bid but with a minimum acceptance threshold of 55%. It also made commitments to safeguard employees and production facilities in Germany which may strengthen its case.
Bain and Advent, meanwhile, still haven’t made a counter bid and have told Osram they have no plans to do so. For now.
That means AMS has ended up bidding against itself for a company which posted double digit falls in revenue across all its business units.
With no sign of a recovery in the beleaguered auto industry, there could be little to show for all this time and effort—except a whole load of debt.