Global sensor suppler ams has launched a bid to purchase photonics supplier OSRAM Licht AG in an all-cash transaction valued at 38.50 euros per share, setting the stage for a possible combined global sensors and photonics giant generating 5 billion euro in revenue.
The proposed transaction, which would be financed with the help of a 4.2 billion euro bridge loan underwritten by HSBC and UBS, is seen as helping expedite the diversification of ams’ revenue mix, enhancing its manufacturing footprint with economies of scale and cost benefits, and leveraging complementary market strengths of both companies.
The potential merger is the most significant strategic move by ams to broaden its footprint. The company has made several smaller announcements regarding development of cutting-edge technologies. In July, ams announced a collaboration with SmartSens on 3D and near infrared sensors. In February 2018, ams acquired KeyLemon, which provides biometric sensing solutions based on facial and speaker recognition.
The ams-OSRAM linkup would reportedly help diversify ams’ revenue base by making it less subject to fluctuations in the consumer market. Once OSRAM is factored into the revenue mix, 35% of sales revenue would come from consumer applications, and 45% from automotive, with the latter benefitting from the combined company’s strengths in high-revenue, cutting-edge applications such as autonomous vehicles.
The widespread integration of technologies into ready-to-use solutions certainly could play into the benefits of the companies merging. Increasingly, sensors and photonics sources are packaged as a single solution that incorporates emitter, optical path, receiver, and driver ICs with embedded algorithms and application layer software. OSRAM’ strengths in high-power and infrared LEDs and EEL is considered a strong complement to ams' emitter portfolio of high-performance VCSELs and VCSEL arrays. The proposed merger would bolster ams’ presence in the optical semiconductor market and make ams a one-stop provider of sensing and optical solutions for growth applications such as 3D sensing, in-cabin sensing, industrial imaging, assisted and autonomous driving, automotive human-machine interface, automotive digital lighting, consumer AR/VR and personal healthcare.
Manufacturing economies of scale could also benefit. OSRAM SRAM has large manufacturing plants in Malaysia and China, while ams is established in Singapore. The availability and relative proximity of three manufacturing plants in southeast Asia could improve plant utilization rates and facilitate insourcing of some components. According to ams, the company will consolidate all front-end LED production and development in Regensburg, Germany, while moving all back-end LED production to the combined company’s Asia plants.