Ams will sell its own shares as part of its Osram financing (UPDATED)

Austrian sensor company ams said it will sell the 4% of ams shares that it directly owns, ahead of issuing new stock to existing shareholders. The move is part of the firm’s effort to finance its acquisition of Osram, and is intended to prevent automatic dilution of the ams-owned shares.

As LEDs Magazine has reported, Premstaetten-based ams needs to raise money to pay back €1.65 billion ($1.82B) of a €4.4B ($4.95B)** bridge loan it took to acquire Osram on the public market at €41 ($45.13) per share.

The acquisition of a company four times the size of €1.4B ($1.54B) ams has been a financial challenge, especially considering that ams failed to purchase enough to gain control of Munich-based Osram’s cash flow. The 59.9% that ams acquired gave it governing control. It needed 75% for cash control.

Thus, at an Extraordinary General Meeting of shareholders last Friday, ams asked for and won approval to issue new shares to help pay a loan provided by three banks: Bank of America Merrill Lynch International Designated Activity Company based in Dublin; HSBC Bank plc based in London; and UBS Europe SE based in Frankfurt.

It noted at the time that the new shares would not dilute existing shares, but it did not explain how. That changed yesterday, as it announced that ams’ own company shares, known as “treasury stock” and representing about 4% of all shares, will change hands prior to the new rights issue.

“Ams...announces the intention to place its entire 3.35 million shares of treasury stock by means of a private placement at market conditions to selected institutional investors,” the company stated.

The sale to institutional investors protects ams itself against dilution, because Austrian law prohibits treasury stock from participating in rights issues such as the one now planned. Thus, the ams-owned shares would have automatically diluted, ams explained. Yesterday’s announcement served as a mandatory two-week pre-notification of the sale, ams told LEDs Magazine.

The institutional buyers of the treasury stock will be able to participate in the rights issues.

Ams has not yet set a date, price, and volume for the new shares. Although the new stock could very well dilute the value of all shares, a separate document on ams’ website explains that shareholders will retain overall value by virtue of the combination of new and old shares.

“Existing shareholders are economically compensated for the share price reduction from the Rights Issue Discount by the value of the subscription rights granted to them,” ams states.

Ams said the placement of treasury shares into private hands “is expected to be executed by UBS and HSBC.” Those are the same two institutions that are underwriting the new shares.

Ams’ re-financing plan for the remaining €2.76B ($3.08B) of the €4.4B bridge loan calls for issuing debt.

The company’s acquisition of Osram valued Osram at €4.58B ($5.04B). Osram in its last fiscal year had revenue of €4.1B ($4.52B). The company had 23,500 employees at the end of September, compared to 8600 for €1.4B ams.

Ams intends to emphasize the photonics strength of Osram while de-emphasizing general illumination. Osram employee groups have opposed the ams acquisition.

MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]).

*Editor’s note: ams reports financials in USD while Osram reports in EUR; currency is provided in both EUR and USD for consistency and rounded up as appropriate except where directly quoted. Currency is provided at the latest valuation as of time of publication.

**Correction notice, Jul. 1, 2020: Earlier LEDs Magazine stories have reported the €4.4B as €3.97B, for reasons possibly related to how much of the loan had been drawn down. While we have been reporting the parts correctly at €2.76B and €1.65B, we have been misstating their sum. We apologize for the error, which we have now spotted in articles on May 14, Jan. 29, Jan. 24, Jan. 13, and Jan. 3.

Updated Jul 1, 2020.