By Kirsti Knolle and Alexander Hübner
VIENNA (Reuters) - An unprecedented bidding war has erupted over German lighting group Osram (DE:OSRn), with private equity group Bain swapping partners to team up with Advent to prepare to outbid Austria's AMS (S:AMS) (VI:AMS).
The Austrian sensor specialist made a 4.3 billion euro ($4.7 billion) bid for the larger Osram earlier this month.
AMS had itself surpassed a 4 billion euro offer that Bain had made, that time in combination with Carlyle Group (NASDAQ:CG). Bain turned to Advent as Carlyle did not want to put any more cash on the table, people close to the matter have said.
The clock is ticking with the AMS offer set to expire on Oct. 1. However, AMS could still lift its own offer before then, which would lead to an extension of the offer period until Oct. 15.
HOW DID WE GET HERE?
Bain and Carlyle had until mid August been optimistic about acquiring the market leader in automotive lighting for 35 euros per share, having secured the support of Osram's management and its supervisory board.
Then AMS entered the fray, first announcing then launching a higher offer pitched at 38.50 euros per share. The German group was not enthusiastic initially, since the much smaller company said it would sell certain divisions and cut jobs if successful.
Osram employee representatives spoke out against the AMS offer.
However, the "financial attractiveness" of AMS's bid led Osram to advise its shareholders to sell its stock to the Austrian group.
AMS has said it would be happy with 62.5% of Osram shares, of which it currently holds 5.5%. Bain and Carlyle had set a 70% threshold.
HOW WOULD ADVENT JOIN THE RACE?
As the offers expire in a few days, there is no way legally for Advent to simply join the Bain & Carlyle consortium and add funds.
There is also not enough time left for it to enter the race as part of a new bidding consortium, as the German watchdog needs to be given two weeks to approve a new offer.
However, there are ways around this: After Bain & Advent committed to making a "meaningfully" higher offer than AMS, investors may decide not to tender their shares to the Austrian company.
If neither Bain & Carlyle nor AMS reached the necessary threshold to buy Osram, everything could start from scratch.
Bain's new offer would have to be at least 0.50 euros per share higher than AMS's offer of 38.50 euros per share, because Bain has made a corresponding commitment to Osram.
A key question is, to what extent its lenders are willing to support it. The sensor specialist agreed to take on more than 4 billion euros in additional debt to finance its current bid.