AMS will ask to dominate Osram

Osram acquirer ams said it will take measures aimed at overcoming the German legal barrier preventing it from smoothly integrating the two companies.

AMS, a sensor company based in Premstaetten, Austria, will now seek to upgrade the acquisition into what's known in Germany as a domination agreement. Domination would give ams more control of Osram and would facilitate discussions between the two outfits aimed at streamlining joint operations.

Without domination status, the two companies have been hindered in their efforts to find synergies in a combined organizational structure, Osram CEO Olaf Berlien revealed last week, as LEDs Magazine reported.

Having had enough of that rocky road, ams CEO Alexander Everke announced last night after stock markets closed that ams will now seek Osram's permission to consider the acquisition as a domination agreement, known in full as a domination and profit and loss transfer agreement (DPLTA).

"We intend to implement a DPLTA in order to enable both companies to work together and realize our joint strategic vision of creating a global leader in sensor solutions and photonics in an efficient manner,” Everke said. “We look forward to building upon the collaboration with our Osram colleagues to begin a successful integration once the transaction has closed."

An ams spokesperson further elaborated that a domination agreement “facilitates the speedy implementation of ams' strategic vision for Osram.”

AMS would have secured domination had it managed to gain control of 75% of Osram shares in its public market takeover. It managed 59.9%, enough to give it basic governing control but not domination of the Munich-based photonics and lighting company.

Without domination, German law prevents the two companies from discussing detailed inner workings, unless they offer the same information to other shareholders, Berlien explained last week.

As LEDs has reported, the lack of domination also bars ams from access to Osram cash. That shortcoming prompted ams to plan a rights issue in which it will sell new shares to partially pay off loans it took to finance the acquisition of Osram.

Now it is attempting to rectify the organizational obstacles by gaining domination after all (it's unclear whether that might nullify the need for the rights issues, as ams would then have access to Osram cash).

While a 75% acquisition would have bought domination, it turns out that there is another route to the same end.

According to ams, all it needs now is domination approval by 75% of Osram shareholders, which it will seek at an extraordinary general meeting of Osram shareholders. AMS did not say when that meeting will take place. But an ams spokesperson told LEDs that it is confident the measure will pass. As ams owns 59.9% of Osram, it would need Osram shareholders totaling 25.1% of holding to also vote in favor of ams domination.

It is believed that ams would then have to offer some form of compensation to those shareholders, possibly by purchasing their holdings or through some other means.

“Once the DPLTA is implemented, the remaining shareholders have the right/option to sell their shares to ams at a certain valuation, which will be decided in the future,” an ams spokesperson told LEDs.

AMS expects to close the acquisition with a 59.9% holding in the second quarter.

It's not out of the question that it might also manage to purchase more Osram shares.

AMS continues to persevere in its Osram efforts which began percolating well over seven months ago before abating and then picking up again in July.

Its measures have included convening an extraordinary general meeting of its shareholders to approve the rights issue to help finance the acquisition as well as an extension of its deadline for Osram shareholders to sell to ams.

It has also faced employee opposition at Osram.

Every step has posed the challenges that can arise when a company attempts to acquire another company that was nearly four times its size at the acquisition's outset. Today ams reported 2019 year-end revenue of $2.08 billion (it reports in US dollars), still much smaller than €4.1B Osram. AMS revenue grew by 32% over 2018's $1.58B, and net profits surged to $331.6B from $11.8B. It attributed the revenue gain to “ams’ consumer business including 3-D sensing and advanced light sensing in the second half of 2019,” and also noted that “ams saw continued strength in the fourth quarter given healthy consumer demand and very good operational performance.”

AMS' customers include Apple, which uses ams sensors in iPhones.

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