Another Osram update

As mentioned in the comments yesterday evening, I sold my Osram shares at 35,40 EUR yesterday. Why did I do this ? The “new” spread at around 8% is even more attractive than the original spread when I bought it.

The reason is quite simple: in my opinion we have now a very different different situation with the following new issues:

  • I do not know these AMS guys at all
  • they had already pulled their offer once
  • the AMS offer is clearly more hostile, Osram management might oppose it as they might not get the same deal that the PEs offered them. I am not an expert on “standstill agreements” but this seems to be the first hurdle
  • the AMS offer will take a lot longer to close even if successful (antitrust etc.)
  • However for me the tipping point was the fact that AMS shareholders clearly didn’t like the deal with their stock losing almost -10% yesterday

Especially the last point indicates that the 38,50 EUR per share might not be the super bargain that some existing Osram investors think that their stock represents, otherwise AMS investors should have been more enthusiastic.

Yes, there is clearly a small chance that the PEs will increase their bid but overall this new situation is too hard to handicap for me at the moment.

Additionally I think that the risk of a “non-deal” scenario even increased. If the AMS deal would fall away again, I don’t think that the PEs woul reach the 70% now with the 35 EUR offer and I am not sure if they would increase their bid in this scenario.

That’s why sold, took a higher profit than I initially expected and moved to the sideline.

Maybe there is another opportunity in the next few weeks. Who knows ?

16 comments

  • ZAYO is developing beautifully. It came to my attention when this blog posted a link to a YAV Zayo write-up. It is now offering c.7% IRR ($33.66 with a take out at $35 at around the 31/03/2020). Delays will hit the IRR but there is room at 7%

  • There are rumours that bain and Carlyle are increasing the bid. erosnally I do think that this is only a low probability event at the current stage.

  • monkeyofaustria

    Have you ever had a look onto the possible Dell VMWare arbitrage? Might be a Special situation for you!

    • No, can you give me a brief summary why ?

      • monkeyofaustria

        For every Dell share Dell owns 0.44 VMWare shares. Dell is trading at a discount to that. Plus you get the legacy Dell business and the EMC business. Simple: Sum of the parts is more than Dell valuation. Dell can sell the VMWare stake in 2021 without having to pay taxes.

  • I have bought a little bit more. Maybe I am a sucker but yesterday’s press release from AMS seemed like a very positive development:

    https://ams.com/-/osram-update

    “Based on the recent discussions with the Management Board of OSRAM, ams currently expects to be able to start the tender period of its offer during the offer period of the existing offer from Bain Capital and The Carlyle Group, thus before the end of 5 September 2019.”

    I would have expected the stock to trade up today given that I read that the AMS bid seems to be serious, that the Osram board seems open for discussion and given that AMS expects to launch a tender offer in a few weeks. Yet shares are barely up today. The market seems not convinced by the AMS offer.

    • We will see how it works out. I think one negative news item was the fact that AMS inititally said that Osram needs to commit to waive the standstill until 15.08. and they now extended it.

      The issue is that theoretically Osram could play for time now. But I do not know and therefore I do not invets….

      • The only reason to play for time is to get Bain/Carlyle to increase their offer. If they do not waive the standstill, there will be even more pressure from shareholders and the €35 offer will lapse anyway because it is unlikely that the minimum shareholding will be reached.

        I am with Pietje.
        Also, if you annualize the spread on the 38.5 offer it is not “super high” yet attractive enough (>20% in my book).

        • Do you know if AMS AG needs shareholder approval for the Deal?

        • Yes, AMS needs 50% shareholder approval.

        • So I guess that is another hurdle to clear. All in I would say that the spread to 38.5 is justiifed:
          – so far we have only the intend for an offer
          – it is not clear if Osram management support sit or if they just “Play nice” for the time being
          – AMS shareholders need to approve on the back of a more than -10% decline

          For me still to difficult to handicap, but I guess for others it is easier.

        • Ig Metall rejects AMS takeover. The soap is continuing.

        • I Think i order some extra popcorn to watch this playing out…

  • Have you thought about playing the Scout24 situation? I think the risk return profile is quite good and the H1 numbers are strong as well all in context of a share price that has not moved that much.

  • Very thoughtful of you. Exactly the same feeling. Well done

Leave a Reply to MM Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.