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Bain, Carlyle Face Tough Funding Talks in Osram Pursuit

Bain, Carlyle Face Tough Funding Talks in Osram Pursuit

(Bloomberg) -- Bain Capital and Carlyle Group LP’s pursuit of Osram Licht AG faces a key test this week as the buyout firms meet banks to discuss funding a potential bid for the German lighting business, people with knowledge of the matter said.

Potential lenders to the consortium have raised concerns about future earnings forecasts for the company after Osram issued a string of profit warnings, according to the people. That has led the banks to reconsider the terms they’re willing to offer on an acquisition loan, the people said, asking not to be identified because the information is private.

The financing complications have made it more difficult for the suitors to meet Osram’s asking price, one person said. Osram has been seeking about 36 euros per share, which would value the Munich-based firm at around 3.5 billion euros ($4 billion), the people said. Bain and Carlyle have so far struggled to justify a bid at that level, according to one of the people.

Bain and Carlyle remain in talks with lenders on financing for a potential offer, according to the people. The situation is fluid, and the buyout firms could make a decision as soon as the next few days about whether to proceed with a formal bid, they said. Representatives for Bain, Carlyle and Osram declined to comment.

Osram was initially hoping to reach a preliminary agreement on price with the suitors last week, though negotiations have dragged on, the people said. It hasn’t helped that Osram’s shares have risen nearly 10% since the beginning of last week, narrowing the potential premium from any offer. They were trading at 27.63 euros on Tuesday afternoon in Frankfurt, giving the company a market value of 2.7 billion euros.

Negotiations to buy Osram, a former Siemens AG unit, have been moving slowly since they were first revealed in February. Osram in March announced its sixth profit warning in just over a year as orders slowed for its lights, which are used in cars and smartphones. The company said in May the general economic slowdown is hurting its business.

Read more about Osram’s financial results here.

Osram Chief Financial Officer Ingo Bank said in a Bloomberg Television interview in May that talks with the company’s private equity suitors were continuing, though the question of whether they’d finally place a bid was still open.

--With assistance from Oliver Sachgau.

To contact the reporters on this story: Eyk Henning in Frankfurt at ehenning1@bloomberg.net;Sarah Syed in London at ssyed35@bloomberg.net;Dinesh Nair in London at dnair5@bloomberg.net

To contact the editors responsible for this story: Dinesh Nair at dnair5@bloomberg.net, ;Kenneth Wong at kwong11@bloomberg.net, Amy Thomson, Ben Scent

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