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MUNICH (Reuters) – Hedge funds control 35-45% of the shares of German lighting group Osram (DE:), posing a headache for Austrian suitor AMS (VI:) as the investors may press for the $5 billion offer to be sweetened, a person close to the matter said on Thursday.
An initial bid by AMS to create a global leader in sensors and lights stumbled last month when it fell short of the necessary shareholder backing. Since then AMS has lowered the acceptance threshold to 55% to try to get the deal over the line, while keeping the offer price at 41 euros a share.
Osram Chief Executive Olaf Berlien told German daily Sueddeutsche Zeitung that some investors seem to have no intention of tendering their shares by the Dec. 5 deadline.
“It appears that a number of hedge funds have acquired shares with the aim of selling them at a later date and at a higher price,” he told the newspaper, which first reported the stakes held by hedge funds.
German law allows for courts to determine that minority investors be compensated at a higher price for their shares when an acquirer and a target company strike a so-called domination agreement, which regularly prompts hedge funds to hold back shares aiming to benefit from a deferred sale.
However, if too many speculative investors decide to hold back shares that can lead to deals falling apart, as seen in initial failed attempts for a leveraged buyout of generics firm Stada. That deal eventually went through in 2017 after the offer price was bumped up.
AMS – which already controls 20% of Osram – said on Wednesday that 3.3% of Osram shares have been tendered so far.
On Oct 31, hedge fund Sand Grove Capital Management disclosed a 5.75% Osram stake.
Around 10% of Osram shares are held by exchange-traded funds, which according to German law, are not allowed to sell their stake as long as the takeover is not completed, banking sources have said.
Retail investors, which often ignore tender offers, hold 20%-25%, the sources have said.
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