Banks stuck with $550m stake in Austria’s AMS after rights issue

Banks including UBS and HSBC are set to be stuck with a $550m (SFr528m) stake in Austrian sensor maker AMS, after a rights issue to help pay for its takeover of Germany’s Osram received a frosty reception from the stock market.

Shares in AMS fell more than 8 per cent on Wednesday to SFr8.75 in Swiss trading, well below the SFr9.20 at which the new stock was underwritten by banks and offered to investors.

Wednesday’s move means that the syndicate of banks placing the shares suffered mark-to-market losses of approximately $27m, net of fees, based on the 57.4m shares in AMS they were left holding. 

UBS and HSBC were the lead underwriters on the AMS rights issue, which raised $1.81bn (SFr1.75bn). Other banks on the syndicate included Bank of America, Citigroup, Commerzbank, Deutsche Bank, Morgan Stanley and Austria’s Erste Group. UBS and HSBC declined to comment.

Only 70 per cent of the 117.5m shares in AMS were successfully sold to investors, according to company filings.

The shortfall in placing the rights issue is one of the largest since UK banks were left saddled with almost three-quarters of British lender Bradford & Bingley’s £400m capital raise in 2008, according to a banker on the deal.

The situation underscores the challenges AMS has faced in completing an €4.5bn all-cash deal to buy struggling German lighting and sensor group Osram, which was agreed in December. 

The Premstaetten-based tech group makes facial recognition sensors for Apple and Android devices and intends for the acquisition to diversify its business by adding Osram’s large automotive business and expertise in laser sensors.

Those efforts have been hit by the effects of coronavirus, which has ravaged the global economy and sent shares in AMS down more than 72 per cent since February 10, to give it a market value of just over SFr2.6bn.

In December, after failing in a first takeover attempt in which it was pitched against private equity groups Bain and Advent, AMS succeeded in crossing a reduced acceptance threshold of 55 per cent with its second bid, of €41 per share. 

Workers’ representatives remained resolutely opposed to the approach by AMS, which at the time was a third of the size of its takeover target. They argued that it would not be able to manage a large global company and said that job cuts would inevitably follow. 

To placate unions, AMS agreed to rule out merger-related lay-offs until the end of 2022. 

Two weeks ago, to prove its commitment to the deal, AMS revealed that it had used its own cash to increase its holding in Osram to more than 23 per cent.

Osram, which makes lights and lasers for cars, last month scrapped its guidance for the 2020 fiscal year, citing “unprecedented operational and financial challenges”. 

In a statement, the Munich-based business said “the economic impact of the pandemic . . . can neither be adequately determined nor reliably quantified at this time”. It added it was considering the “temporary closure of some of its own production facilities”. 

Osram’s shares are trading at about €30, almost 30 per cent lower than the €41 per share offered by AMS.