Hedge funds control 35-45% of the shares of German lighting group Osram, posing a headache for Austrian suitor AMS as the investors may press for the US$5bn offer to be sweetened.
An initial bid by AMS to create a global leader in sensors and lights fell apart 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 €41a share.
Osram chief executive Olaf Berlien says that some investors seem to have no intention of tendering their shares by the 5 December deadline.
He says: “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.”
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 27 November that 3.3% of Osram shares have been tendered so far.
On 31 October, hedge fund Sand Grove Capital Management disclosed a 5.75% Osram stake.