Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

ams AG Finds a Loophole: Ups the Osram Bid to €41 but Does Not Extend

Ams Offer Does Not Win Osram. Back To Square 2.

Quiddity Advisors

Event-Driven

The long history is that in 2013, <a href="https://www.smartkarma.com/entities/siemens-ag" target="_blank" data-smartkarma-citation="entities:21713:1" rel="noopener">Siemens AG (SIE GR)</a><a href="https://www.siemens.com/investor/pool/en/investor_relations/tax_deferral_for_canadian_income_tax_purposes_english.pdf" target="_blank" rel="noopener">spun off</a><a href="https://www.smartkarma.com/entities/osram-licht-ag" target="_blank" data-smartkarma-citation="entities:21689:1" rel="noopener">OSRAM Licht AG (OSR GR)</a>, which had been a lightbulb maker for a century. In 2015, Olaf Berlien became CEO. He later made plans to transform Osram from a conventional light bulb manufacturer into a high-tech company that builds microchips, sensors for the auto industry, and digital lighting systems. Since then, he has sold the lightbulb business, and in H2 2018 started the process of offloading its luminaires business. In 2017, Siemens sold the last of its holdings in Osram.In November 2018, <a href="https://www.bloomberg.com/news/articles/2018-11-27/bain-said-to-be-exploring-takeover-bid-for-germany-s-osram-licht" target="_blank" rel="noopener">Bloomberg reported</a> that Bain Capital had been looking to acquire Osram. In mid-February 2019, the <a href="https://www.ft.com/content/d5d9360e-2fbf-11e9-8744-e7016697f225" target="_blank" rel="noopener">FT</a> and Bloomberg reported that Bain and Carlyle had started joint bid talks with Osram. The company confirmed, “The company is currently engaged in detailed discussions with the interested parties.” In April, there were questions sparked by a Manager Magazin <a href="https://www.euronews.com/2019/04/18/bain-carlyle-losing-confidence-in-osram-bid-manager-magazin" target="_blank" rel="noopener">article</a> after less-than-stellar earnings prospects (at end-March, management lowered 2019 revenue projections to a fall of 11-14% for the year, vs +0-3% prior, and lowered EBITDA margin expectations from the 12-14% range to 8-10%, after the company cut profit forecasts twice the previous year) which suggested there was a possibility the PE firms would walk, but everyone seemed to say talks were going OK. Q2 earnings (for quarter to end-March) released in early May saw Q2 EBITDA -56%yoy led by sharp revenue falls in microchips on weak auto sales and weak general lighting. The company then discontinued its buyback program.In early June, <a href="https://www.smartkarma.com/entities/ams-ag" target="_blank" data-smartkarma-citation="entities:22278:1" rel="noopener">ams AG (AMS SW)</a> signed a confidentiality agreement with Osram in order to gain access for due diligence. This was unknown until recently.In early July, Osram confirmed a binding offer had been received from Bain and Carlyle at €35/share. The <a href="https://luz-offer.com/download/companies/ma1030/ma1030pflicht/20190704_10_LuzPublicationoffer_en.PDF" target="_blank" rel="noopener">bid</a> became official the next day, 4 July and Osram agreed to offer its support. Osram and the bidders held a call on 5 July with <a href="https://www.osram-group.com/~/media/Files/O/Osram/Investor%20Relations/Publications_other/2019/190705_Analyst%20Call%20Presentation%20final.pdf" target="_blank" rel="noopener">presentation materials</a>. Osram's largest shareholder Allianz Global quickly made their objections known - the bid was too low.On 15 July, AMS made a non-binding offer for Osram at €38.50. However, AMS withdrew the offer after a few hours on a lack of funds. A week later they showed their interest again.On 31 July, Osram released earnings for Q3 (<a href="https://www.osram-group.com/~/media/Files/O/Osram/documents/en/q3-2019-results-presentation.pdf" target="_blank" rel="noopener">Q3 FY19</a>).On 8 August, Osram's largest investor Allianz Global offered a <a href="https://www.allianzgi.com/en/our-firm/press-centre/media/press-releases/osram" target="_blank" rel="noopener">press release</a>. <blockquote>The offer for OSRAM shares made by Bain and Carlyle implicitly supports AllianzGI’s view that there is upside potential for OSRAM and its technology in the foreseeable future. However, as its largest existing shareholder, AllianzGI has commissioned its own independent fairness opinion pursuant to IDW S81 standard on the evaluation of the company, the results of which support AllianzGI’s view that OSRAM shares are worth more than the EUR 35 per share currently on offer.  Based on available information, AllianzGI is minded not to accept the offer despite it being recommended to shareholders by the Board of Management and Supervisory Board of OSRAM Licht AG.  Having sought to engage with OSRAM’s Board of Management and Supervisory Board over the past year, AllianzGI finds it regrettable that they appear to have insufficient confidence in the business they are managing that they have chosen instead to sell out at what looks to be a knock-down price. </blockquote>The same day the SdK Group (Schutzgemeinschaft der Kapitalanleger) which represents small shareholders in Germany said that it held some shares and that the Bain &amp; Carlyle takeover offer was too low.<h2>The New News</h2>Three days later AMS made a <a href="https://ams.com/-/ams-takeover-proposal-for-osram" target="_blank" rel="noopener">takeover proposal</a> for Osram at €38.50, and the two started discussions on the 13th. A day later Osram released a statement saying talks were "constructive." AMS said it would launch the takeover offer as soon as Osram waives the 12-month standstill agreement which was signed in June as a requirement for gaining access to due diligence.  At latest, the AMS offer is set to open by 5 September, which is when the Bain &amp; Carlyle takeover offer ends.More below the fold.

The long history is that in 2013, Siemens AG (SIE GR)spun offOSRAM Licht AG (OSR GR), which had been a lightbulb maker for a century. In 2015, Olaf Berlien became CEO. He later made plans to transform Osram from a conventional light bulb manufacturer into a high-tech company that builds microchips, sensors for the auto industry, and digital lighting systems. Since then, he has sold the lightbulb business, and in H2 2018 started the process of offloading its luminaires business. In 2017, Siemens sold the last of its holdings in Osram.In November 2018, Bloomberg reported that Bain Capital had been looking to acquire Osram. In mid-February 2019, the FT and Bloomberg reported that Bain and Carlyle had started joint bid talks with Osram. The company confirmed, “The company is currently engaged in detailed discussions with the interested parties.” In April, there were questions sparked by a Manager Magazin article after less-than-stellar earnings prospects (at end-March, management lowered 2019 revenue projections to a fall of 11-14% for the year, vs +0-3% prior, and lowered EBITDA margin expectations from the 12-14% range to 8-10%, after the company cut profit forecasts twice the previous year) which suggested there was a possibility the PE firms would walk, but everyone seemed to say talks were going OK. Q2 earnings (for quarter to end-March) released in early May saw Q2 EBITDA -56%yoy led by sharp revenue falls in microchips on weak auto sales and weak general lighting. The company then discontinued its buyback program.In early June, ams AG (AMS SW) signed a confidentiality agreement with Osram in order to gain access for due diligence. This was unknown until recently.In early July, Osram confirmed a binding offer had been received from Bain and Carlyle at €35/share. The bid became official the next day, 4 July and Osram agreed to offer its support. Osram and the bidders held a call on 5 July with presentation materials. Osram's largest shareholder Allianz Global quickly made their objections known - the bid was too low.On 15 July, AMS made a non-binding offer for Osram at €38.50. However, AMS withdrew the offer after a few hours on a lack of funds. A week later they showed their interest again.On 31 July, Osram released earnings for Q3 (Q3 FY19).On 8 August, Osram's largest investor Allianz Global offered a press release. The offer for OSRAM shares made by Bain and Carlyle implicitly supports AllianzGI’s view that there is upside potential for OSRAM and its technology in the foreseeable future. However, as its largest existing shareholder, AllianzGI has commissioned its own independent fairness opinion pursuant to IDW S81 standard on the evaluation of the company, the results of which support AllianzGI’s view that OSRAM shares are worth more than the EUR 35 per share currently on offer.   Based on available information, AllianzGI is minded not to accept the offer despite it being recommended to shareholders by the Board of Management and Supervisory Board of OSRAM Licht AG.   Having sought to engage with OSRAM’s Board of Management and Supervisory Board over the past year, AllianzGI finds it regrettable that they appear to have insufficient confidence in the business they are managing that they have chosen instead to sell out at what looks to be a knock-down price. The same day the SdK Group (Schutzgemeinschaft der Kapitalanleger) which represents small shareholders in Germany said that it held some shares and that the Bain &amp; Carlyle takeover offer was too low.The New NewsThree days later AMS made a takeover proposal for Osram at €38.50, and the two started discussions on the 13th. A day later Osram released a statement saying talks were "constructive." AMS said it would launch the takeover offer as soon as Osram waives the 12-month standstill agreement which was signed in June as a requirement for gaining access to due diligence.  At latest, the AMS offer is set to open by 5 September, which is when the Bain &amp; Carlyle takeover offer ends.More below the fold.

Ams Deal for Osram On the Table: Trading Wide