It doesn't take much insight to spot this: The first half of the year ended yesterday. But we point it out because today was the first full day that Germany's Osram was to have finally become a no-doubt-about-it part of Austrian sensor company ams.
And guess what. It hasn't. Not as of this writing, anyway, when the main corporate news coming out of ams is that it has priced some bonds to help pay for Osram, and that, oh, yes, Austrian authorities are sniffing around some possible insider trading violations by individuals who in the words of ams "may be related or unrelated to ams."
Ams acquired Osram last December pending regulatory approval. From that moment on — and even before — it had steadfastly repeated that it expected regulators to bless the deal by June 30.
At the time of the acquisition, Premstaetten-based ams said it "continues to expect the closing of the transaction in the first half of 2020." By mid-March, it issued a press release headlined "ams confirms public offer for Osram expected to close in the second quarter 2020." The same release explained that "the only remaining closing condition relates to the receipt of the required regulatory approvals." On Apr. 29, ams stated that it "is in the process of attaining remaining required merger control clearances for the transaction and currently expects the transaction to close by the end of the quarter."
So yesterday, when LEDs Magazine received an after-hours email from the company, we assumed before reading it that would herald the fall of that last hurdle.
It did not. In fact, yesterday's announcement made no mention at all of regulatory approval.
Rather, it stated that ams has now priced the bonds that it is issuing to help pay back the money it borrowed to acquire Osram in the first place. Ams said it is issuing €650 million of senior notes at 6% and $400 million of senior notes at 7%. As LEDs reported in May, ams decided to issue bonds to help make up a €2.76 billion shortfall in cash it needs to finance the acquisition.
Yesterday's announcement filled in the details of those bonds, which would not reach the needed €2.76B, but are a big step in that direction. The €2.76B is about two-thirds of the total €4.4B that ams needs to pay off its Osram-related bank loans.* It is raising another €1.65B by issuing stock.
As for the timing of the bonds, ams said, "The offering of the notes is expected to close and the notes are expected to be issued on or around 6 July 2020."
Perhaps not coincidentally, July 6 is also the date that some observers have suggested is when regulators might clear the deal. It would seem that regulators would be taking into account, among other things, the long-term financial viability of the acquisition; the pricing of the bonds might help provide assurance that the whole deal won't collapse for lack of funds. As LEDs has been reporting for the last six months, the acquisition has been fraught with many twists and turns, including ams' varied efforts to pay for a company nearly four times its size.
The regulator is believed to be the European Commission, although ams laid out other possible regulatory scenarios in its original Osram offer document.
We sent an email to ams yesterday asking for the latest expectations on regulatory approval, but we have not heard back.
If approval does come on or soon after July 6, then ams will have effectively met its targeted first half, albeit out by a few days.
Then again, this has been a saga.
Ams first appeared in the Osram sweepstakes a year ago, when it flirted on and off with a bid while private equity firms Bain Capital and Carlyle Group were closing in on a joint Osram acquisition. It fell out of the picture until it re-emerged in September with a bid that would trump others', only to fail at the finish line with Osram shareholders in early October.
But with what would become its characteristic try-another-approach tactics, ams came back with a second and slightly different attempt, successfully buying Osram through the public stock market in early December. Notably, while ams acquired enough of Osram to govern the company, it did not acquire enough shares to fully control Osram — to gain what German law calls domination status. As a result, ams has been hampered in its efforts to integrate Osram. It also cannot access Osram's cash (which is dwindling), forcing it to find other means such as stocks and bonds to pay off its acquisition-related loans.
Over the last six months, it has also tried various maneuvers including increasing its shares in Osram; suggesting that Osram shareholders vote in favor of domination; and others.
In case that's not enough turmoil, now the Austrian Financial Market Authority (FMA) is probing possible insider trading of ams shares. "FMA is investigating ams' top management on suspicion of illegal share transactions during the ongoing takeover of Osram," Reuters reported late last week.
After the report ran, ams issued a statement saying that the FMA has "indicated an investigation related to possible insider trading into natural or legal persons who may be related or unrelated to ams."
Whoever or whatever the FMA turns up, the investigation would seem to be one more factor that regulators might want to consider in evaluating whether to approve the acquisition.
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*Note: Earlier LEDs Magazine stories have reported the €4.4B as €3.97B, for reasons possibly related to how much of the loan had been drawn down. While we have been reporting the parts correctly at €2.76B and €1.65B, we have been misstating their sum. We apologize for the error, which we have now spotted in articles on May 14, Jan. 29, Jan. 24, Jan. 13, and Jan. 3, which will be corrected.
MARK HALPER is a contributing editor for LEDs Magazine, and an energy, technology, and business journalist ([email protected]m).
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