Special situation quickie: Osram take-over at EUR 35 /share

This will be a very short one:

Bain Capital and Carlyle want to take over Osram at 35 EUR per share. The offer is friendly as Managment and Supervisory board have agreed to the takeover.

The offer runs until beginning of September and minimum acceptance level is 70%.

There is no detailed offer document out now yet.

Nevertheless I established a 2,5% position at ~33.1 EUR, providing a 5,7% potential return.

Major risk is in my opinion politics (loss of jobs), chances to the upside could come form activists pushing for a higher price. In the meantime there could be clearly hick-ups (not reaching the 70% because of activist involvement) but Bain and Carlyle are pros.

The buyers are top tier PEs who execute this kind of offers well and have the money.

For those investors who remember: I looked at the Osram spin-off 6 years ago, but then failed to buy the stock because my limit was a few cents too low. So I know the company relatively well. This doesn’t of course guarantee any success ……


  • Knowing you as prudent as you are, I am guessing you are out of it today

  • Can you explain to me – very slowly – what the antitrust risk is when two PE companies (with no industry exposure whatsoever) buy Osram?

    This AMS company is a joke. Very unlikely they can table a bid. Shares will come back soon I guess.

    • @SPIESS
      Whilst in this case I don’t see a binary risk per se, I do see a timetable risk derived by the antitrust process.
      As a reference point Toshiba (chip business) / Bain took 8+ months to complete as was held up by Chinese approval… With Osram needing SAMER, similar timetable is not unthinkable?
      In general, with every change of control you are theoretically exposed to antitrust risk, whoever the bidder is.
      Not everything is linked to competition – assessment re: fit and proper owner, etc are also matters reviewed by regulatory bodies.
      Have you seen what just happened on Inmarsat with the CMA in the UK? buyers are sponsors …

  • Offer document is out. https://dgap.de/dgap/News/corporate/luz-cbc-bidco-gmbh-annahmefrist-des-freiwilligen-oeffentlichen-uebernahmeangebots-fuer-die-osram-licht-startet/?newsID=1174455

    And Bain/Carlyle play hardball and will not lower the acceptance ratio below 70%. The pressure is on!

    • It would actually be quite stupid if theyy would lower the threshold right now. Thay can do so whenever they want later in the game (if they want…).

      • I do not think they “can do so whenever they want”. Read p. 65 of the offer! According to their banks, they cannot go lower.

  • Thanks for your post!
    After the announcement I established a small position as well.
    This spread seems suspicious…

  • pietje is right here, the market is pricing some sort of regulatory risk / elongated timeline.
    This will have to go through SAMER.. see Bain/Toshiba which took 8m+ to complete..
    The question is if Osram’s good bits like their LiDAR becomes a factor in how the Chinese look to approval the deal – frankly dont know

  • I think the spread is warranted entirely by the risk of shareholders balking and the 70% acceptance ratio is not reached. Think about it: If you – as an Osram holder – have NOT bought the shares in the last 3 months or before 2014 (!) you are “in the hole”. Of course, this is classical “anchoring”, but those investors likely think the bid is “opportunistic” and it will screw shareholders.

    The good thing: If the spread stays this large, there is a fair chance that the shareholder structure gets skewed towards the arbs and they increase the chance that the deal gets done.

    Did you do your typical scenario probabilities?

    • Personally, I don’t understand why for instance Metro was trading at 16 with no spread in comparison to Osram. But we will see. Based on recent prices the downside of the deal seems to be limited to around -20%. So if one assumes a probability >2/3 for the Deal happening, it makes sense to buy some.

  • Interesting idea. Also bought a few shares. What explanation do you have for the current spread?

    • Maybe because there are very few Details available yet ?

      • Could be, but I think that that is a bit of a weak explanation. As far as I know all important facts are available. There’s an indicative timeline, financing should be trivial given the buyers and a 70% acceptance rate is pretty low. Does one really need to read the fine print in the prospectus to determine this should trade at a 0.5% spread instead of a 6% spread? That’s not how other mergers usually trade.

        I think it’s more likely the market is pricing in some regulatory / political risk, which is a bit scarier. Seems very unlikely to me the spread will mostly disappear after the prospectus is released (though it might become somewhat smaller).

        • I don’t think there is regulatory risk with the P/E buyers. The only issue as I mentioned could be some political risk (job losses etc.).

          So far the trade unsions have been quiet.

      • Two weeks later: the offer document has been released but the spread is just as wide as before so I think we can discard the ‘lack of details’ thesis. I still think the market is pricing in regulatory problems.That said, I own a small position too.

        • You are right: Not the lack of details.
          But what regulatory risk? You clearly should read the offer document. I will even point you to section 12.1.

        • What is your point? I see in section 12.1.1 that the deal is conditioned on the approval of 13 regulatory bodies and the German foreign investment control approval. Perhaps you are misreading that section by thinking all these regulators have already approved the deal? Or what else am I missing that means I should ‘clearly read the offer document’? No need to be snarky.

        • Also interesting that shares are up ~3% today on the news that:

          “Austrian sensor specialist AMS on Tuesday said it had decided to re-evaluate a potential transaction with lighting group Osram
          Licht, only days after pulling back from a takeover approach.”.

          Perhaps a small chance a higher bid is still in the cards.

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