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Osram bosses back private equity takeover

08 Jul 2019

€3.4 billion bid for lighting giant from Bain Capital and Carlyle Group will require 70 per cent shareholder support.

Osram’s managing board has said it supports a €3.4 billion offer from a private equity consortium to acquire the Germany-based lighting and photonic component company.

The €35-per-share offer, proposed by Bain Capital and The Carlyle Group, will require support from at least 70 per cent of Osram’s shareholders if it is to proceed.

Osram announced in its release that the private equity pair were making “extensive commitments” with regard to Osram’s locations and employees, adding that existing pension plans “remain unchanged” and that the company’s global headquarters would stay in Munich.

CEO Olaf Berlien added: “Bain and Carlyle are the right partners for Osram at the right time. They support our strategy and facilitate growth. Both are committed to our employees and offer shareholders an attractive premium.”

Tech focus
Coming during a period of extended and profound change within the lighting industry, brought about largely by the transition to LED-based solid-state lighting technology, Osram’s management has increasingly positioned the firm as a technology company, with particular expertise in optical semiconductors and photonics.

Osram now says that the private equity deal will assist with that transformation. “In the case of a successful takeover offer, Osram will have an ownership structure with which the company will be able to continue its necessary transformation even more consequently in these economically and geopolitically uncertain times,” it announced.

“Both private equity firms have extensive experience in supporting companies through transformation processes, have access to an international network and have successfully developed several companies in the past.”

Peter Bauer, chairman of Osram’s supervisory board, added: “We welcome the offer from Bain and Carlyle and are convinced that it represents both a fair value for the shareholders and strategic added value for our company.”

News of the offer price comes five months after Osram confirmed speculation that it was in talks with Bain and Carlyle about a potential takeover, and at a tough time for the company. In May, Berlien and colleagues reported a net loss of €91 million for the quarter ending March 31, as revenues slumped nearly 14 per cent year-on-year.

That was partly due to a sharp drop in sales from its Opto Semiconductors division, which produces LEDs and laser diodes, as demand from the critical automotive and general lighting sectors slumped.

“In our 113-year history, we have repeatedly experienced challenging times, but each time we have emerged stronger than before,” Berlien said at the time. “Our long-term strategy of implementing new applications in the LED sector remains intact. The focus is on optical semiconductors, automotive and digital applications.”

Volatile period
The €35 offer from the private equity pair represented a premium of 21 per cent on the Osram stock price immediately prior to the terms of the proposed deal being made public. However, and as Osram acknowledges, that stock price will have been affected by earlier speculation about the approach by Bain and Carlyle.

According to a Bloomberg report, potential lenders to the buyout pair had raised concerns about Osram’s future earnings in light of the recent slowdown, making it more difficult for them to justify the €36-per-share offer that Osram had apparently been seeking.

If the deal does attract enough shareholder support to proceed, it would mark the end of a volatile six-year period on the stock market for Osram, since it was spun out by former parent company Siemens back in July 2013 at a launch price of €24 per share.

Until last year, the company’s stock had given its shareholders a significant return, peaking at close to €80 in January 2018. But since then it has been all downhill, as a series of profit warnings dragged the stock to a low of €25 in recent weeks.

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