By Kirsti Knolle
VIENNA (Reuters) - Austrian sensor specialist AMS (S:AMS) has pledged to find another way to take over Germany's Osram (DE:OSRn) to form a global leader in sensors and lighting, after its $4.9 billion (3.98 billion pounds) bid for the larger firm fell through on Friday.
AMS managed to collect only 51.6% of Osram shares, significantly less than the 62.5% threshold needed to clinch the takeover.
While it has to return the tendered shares, it will keep the 19.99% direct stake it has built up in recent weeks, making it a powerful investor.
The situation could be further complicated by a bid from private equity, with Bain Capital and Advent already hovering in the background.
Here are possible scenarios, in order of current probability.
AMS SUBMITS A NEW BID
If Osram and the German finance watchdog agree, AMS could launch a new bid within a relatively short time without having to wait the 12 months required by German law.
For this, the Austrian group would have to win over Osram management and labour unions.
Osram Chief Executive Olaf Berlien had refused to sell his stake to AMS as he had doubts about the viability of the offer, while employees had opposed the Austrian bid because they feared a breakup.
AMS might have to up its offer considerably. That could be too much to ask from its lenders, which had already agreed to provide bridge financing of 4.4 billion euros.
The firm had $1.4 billion (1.3 billion euros) in debt at the end of the second quarter and has already spent more than 600 million euros to buy Osram shares in the market in recent weeks.
AMS FURTHER UPS ITS STAKE
Following regulatory clearances after its failed takeover approach, the Austrian group could continue to buy Osram shares in the market. Once it holds 30% it has to make an obligatory takeover offer, according to German law.
In the best case, such an attempt could end up cheaper for AMS than the 41 euros per share it had offered. Again, much would depend on whether AMS lenders go along.
BAIN AND ADVENT LAUNCH AN OFFER
Private equity firm Bain has teamed up with new partner Advent and is currently inspecting Osram's books with "a view to submitting an offer", the lighting group said on Friday.
Bain had initially submitted a 4 billion euro bid with Carlyle Group (O:CG), but turned to a new partner after the latter refused to increase the offer. The new duo has not made any public comment since the AMS bid failed.
Any fresh offer is likely to correspond in essence with the old one in terms of promising Osram it can operate as an independent business, and continuing Berlien's transformation strategy.
Persuading AMS to sell its nearly 20% stake to Bain and Advent seems unrealistic even if they offer significantly more, as AMS has a key interest in Osram's auto business.
Convincing enough investors may therefore prove very difficult, even if the new bidder sets a threshold as low as 62.5%, the level AMS just missed. Private equity usually sets a threshold of around 75%, market sources say.
COOPERATION
Osram and AMS could agree on a "meaningful and mutually beneficial collaboration", as suggested by Berlien on Friday.
That could see the companies supply car manufacturers and new players in autonomous and connected vehicles with lights and sensors that complement each other.
Such a move would leverage some of the synergies AMS has been dreaming of, but would be unlikely to be deep enough to realise chief executive Alexander Everke's vision of packaged products, with AMS sensors tucked into Osram headlights.
Developing joint applications would be costly, and with competition in the market fierce, it would not necessarily make sense to share so much expertise.
NEW AMS APPROACH AFTER ONE-YEAR WAIT
AMS could wait a year and make a new approach. If Osram had not managed by then to stop its sales decline and return to operational profitability, the Austrian company might even get a cheaper package.
Osram became a takeover target after Berlien's strategy of turning it into a high-tech outfit focussed on LEDs and state-of-the-art laser chips failed to bring the hoped-for success.
The German group reported a loss in the third quarter, with all of its business units posting double-digit falls in revenue.
Osram will publish results for the 2018/19 business year on Nov. 12. Analysts are forecasting a loss of 200 million euros.
MERGER OF EQUALS
German trade union IG Metall had put forward the idea of merging Osram and AMS as equals.
Such a deal, normally done via a share swap, could fit in terms of market value - AMS has a market capitalisation of 3.5 billion euros, Osram of 3.9 billion euros.
It could also realise AMS's vision of combining its expertise in sensors with Osram's in high-tech lights and LEDs without the firm having to take on billions of new debt.
However, such a solution would require considerable goodwill from Osram's Berlien and AMS' Everke, which currently seems hard to achieve.