Osram Advises Shareholders to Accept $4.4 Billion Takeover 

(Bloomberg) --

Osram Licht AG gave its backing to a $4.4 billion takeover offer from AMS AG after reaching an agreement with the Austrian sensor maker that will protect workers from merger-related layoffs until 2022.

The German car-part maker’s board recommended Tuesday that investors accept the proposal of 41 euros a share in cash, saying it “represents an appropriate valuation.” Munich-based Osram also reported better-than-expected fourth-quarter earnings, while pushing back mid-term targets.

The decision to back a deal with rival AMS marks a step forward in the months-long takeover battle. AMS’s offer running until Dec. 5 is its third attempt to acquire Osram, which has suffered amid a slump in the automotive industry. Although holding firm on the price, AMS has lowered the minimum acceptance threshold to 55% to make it easier to get a deal over the line.

AMS successfully beat off rival suitors Bain Capital and Advent International and has amassed an almost 20% holding in Osram to strengthen its footing. The tussle for control of the former Siemens AG lighting division was sparked by a series of profit warnings after Osram pushed aggressively into the car sector, and found itself overexposed to an industry slump.

“2019 was certainly one of the hardest years for us in recent history,” Chief Executive Officer Olaf Berlien said on a conference call. “We’re staying cautiously optimistic about 2020.”

Job Cuts

While Osram reported better-than-expected fourth-quarter adjusted earnings before interest, taxes, depreciation and amortization, the company pushed back by two years its mid-term financial goals. The company also needs to cut an undetermined number of staff to adjust to address to structural changes in the industry, Berlien said.

“We need to permanently adjust personnel,” Berlien said. “In the last year we adjusted by 2,300 workers. That’s continuing and there’s no set number right now.”

Osram shares were little changed at 40.16 euros as of 10:56 a.m. in Frankfurt, giving it a market value of about 3.9 billion euros.

For the 2020 fiscal year, the company expects a “moderate change” in revenue, in the range of minus 3% to 3% growth, and an adjusted Ebitda margin between 9% and 11%.

The guidance suggests “very limited” operational improvement and “raises questions on the long term potential of the company,” Morgan Stanley analysts including Lucie Carrier wrote in a report.

Osram’s labor representatives have come out against a deal with AMS out of concern for the company’s 24,000 workers and restructuring plan.

Read more: Osram’s Top Labor Leader Urges German Watchdog to Block AMS Bid

The IG Metall union contends that the company plans about 800 job cuts in Germany, or about 14% of the total.

“With the so-called efficiency program, the Osram executive board endangers the future of Osram,” Klaus Abel, vice chairman and first IG Metall representative of the supervisory board, said in an emailed statement.

To contact the reporter on this story: Oliver Sachgau in Munich at osachgau@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Tara Patel, Andrew Noël

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