German lighting group Osram (OSRn.DE) advised its shareholders on Monday to accept a 4.3 billion euro ($4.8 billion) takeover bid from AMS (AMS.S) (AMS.VI) and sell their shares to the Austrian sensor specialist, saying the offer was economically attractive.
AMS launched its 38.50 euro per share offer for the company earlier this month, beating a rival offer from private equity investors Bain Capital and Carlyle Group (CG.O) by 10%.
“Osram’s executive board and the majority of its supervisory board recommend… that Osram shareholders accept the offer,” the German group said in a statement.
Osram had initially backed the finance investors’ offer, who had agreed to maintain Osram as an independent company with its current management and to support its strategic direction.
However, “the financial attractiveness of the (AMS) offer was to be weighted higher than points of criticism.”
AMS, best known for supplying Apple (AAPL.O) with sensors for its latest iPhones, wants to focus a combined business strongly on the auto industry and supply manufacturers with sensors and lighting solutions for self-driving cars.
AMS said on Monday that feedback from investors on a global roadshow had been positive.
“Based on extensive interaction with investors in Europe, the U.S. and Asia, AMS sees strong support for its strategic vision including Osram, which is reinforcing AMS’ conviction for the offer,” the Austrian group said. Capitalising on the positive momentum, it would lower the acceptance threshold of its offer to 62.5% from the previous 70%.
The biggest Osram shareholders AMS aims to convince are Allianz Global Investors (ALVG.DE) with 9.4% of the stock, UBS (UBSG.S) with 6.2% and Barclays (BARC.L) with 5.5%, according to latest filings.
Osram’s supervisory board decision to recommend AMS’s offer was not unanimous. Employee representatives fear that AMS could break up the company. Osram’s management and supervisory board are worried about the long-term business prospects.
AMS has to take on billions of debt to finance the takeover, and Osram said paying off the funds could become difficult. AMS depended largely on a group of key customers, and that entailed the risk “that the financial situation of the combined group may become very strained” if key customers switched to other technological solutions or place less orders.
Osram also voiced doubts whether the Austrian sensor specialist, whose number of staff is about a third of that of the German group, will be able to stem such a complex takeover.
“There is a risk that AMS may not be able to successfully organise the integration and to realise at the same time the publicly announced synergies in the intended short period of time,” it said.