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Where's the fit? Sensor specialist AMS eyes lighting group Osram

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08/14/2019 | 02:41pm EDT

VIENNA (Reuters) - Austrian sensor specialist AMS plans to buy Osram Licht in a deal that would value the bigger, German group at 4.3 billion euros (£3.9 billion).

VIENNA (Reuters) - Austrian sensor specialist AMS plans to buy Osram Licht in a deal that would value the bigger, German group at 4.3 billion euros (£3.9 billion).

AMS is best known as a supplier to Apple, while Osram's lightbulbs were once ubiquitous in European households. But both companies have diversified.

The Austrian company says that with the acquisition it could create a global heavyweight in sensors and photonics serving the automotive, industrial and medical industries as well as consumer electronics.

Below are key facts about the two companies:

AMS AG

AMS, formerly austriamicrosystems AG and based in a castle in Austria's Styria state, started in 1981 as a U.S.-Austrian joint venture backed by steelmaker Voestalpine which wanted to diversify into semiconductors. It listed in Zurich in 2004.

The group develops infrared sensor technology used for facial recognition in smartphones and tablets, in autonomous driving, factory automation and devices for computer tomography.

Chief Executive Alexander Everke, an electrical engineer, started his career with Osram's former parent company Siemens, later working for Infineon and NXP Semiconductors before joining AMS in 2015.

The group generated revenue of 1.4 billion euros, operating profit of 128 million and net profit of 10.6 million last year with a workforce of 10,000 people. Net debt stood at 1.24 billion euros at end-June.

It has a market capitalisation of 3.4 billion euros.

SENSOR SPECIALIST

AMS's main revenue source are optical sensors - its main customer is Apple which offers 3D facial recognition in its latest iPhones and which analysts estimate accounts for 40% of group revenue.

The Austrian group wants to reduce its dependence on Apple and has recently won Android customers, including Samsung, and China's Xiaomi and Huawei [HWT.UL].

AMS is investing heavily in so-called VCSEL technology - lasers on a chip - used in lidar, or laser-based sensors used in self-driving cars.

AMS also offers display solutions such as OLEDs, display sensors that are thinner and more flexible than light-emitting diodes (LEDs), and is working on sensors capable of scanning surroundings in 3D - so-called world-facing 3D sensors. It makes audio sensors that cancel noise in wireless earbuds and has a joint venture with Wise Road Capital for environmental sensors that detect temperature or moisture.

AMS has production sites in Austria, mainly for front-end semiconductor manufacturing, in the Philippines for testing and related production steps, and in Singapore for optical manufacturing and packaging back-end. It also has a location in Texas, where it bought light sensor supplier TAOS in 2011.

OSRAM

Osram, headquartered in Munich, was created out of a merger in 1919 and was for decades part of Siemens before being spun off and floated in 2013. Its shares have risen 45% since it was listed.

The company, whose lightbulbs were once ubiquitous in European homes, has sought under Chief Executive Olaf Berlien to reinvent itself as a high-tech photonics company, offering products such as infrared or laser lighting used in self-driving cars, mobile phones, or "smart" buildings and cities.

Soon after taking the helm in 2015, Berlin announced a billion-euro investment in a new factory in Malaysia that would produce LED chips for the general lighting market. The move horrified many investors, who feared that market was too vulnerable to price competition from Chinese competitors, and caused a rift with Siemens, at the time still Osram's biggest shareholder.

Berlien has also been acquisitive. He has built up the automotive division as a play on the development of electric and self-driving vehicles.

An industry downturn with its epicentre in China has, however, put the company on the defensive as potential acquirers circle. All of its business units posted double-digit falls in revenue in the third quarter, when Osram reported a loss.

The group reported earnings before interest, tax, depreciation and amortisation (EBITDA) of 655 million euros on revenue of 4.1 billion in 2018 with 24,200 staff. Net debt stood at 424 million euros at the end of June.

Osram has a market capitalisation of 3.4 billion euros.

INTELLIGENT LIGHTING

The group has three segments:

Automotive (AM) develops, produces and sells lamps, light modules and sensor components for automotive applications, including an "intelligent matrix light" for headlamps.

In 2016, Osram acquired Novita Technologies, a U.S.-based manufacturer of LED modules for tail lights and fog lights, as well as daytime running lights. Osram has invested in companies specialising in Lidar.

Another division is Opto Semiconductors (OS). Osram is the world's No.2 supplier of infrared LED components used in smartphones and autonomous driving. The division commissioned an LED chip production site in Kulim, Malaysia, in 2016. Osram is also developing VCSELs.

Osram's Digital division bundles the businesses that seek to benefit from digitalization in fields ranging from electronic components and lighting systems to software for lighting management. In 2017, it acquired Boston-based Digital Lumens, which specialises in energy-efficient lighting and sensor- and software-based services such as asset tracking.

The unit also offers, among others, stage and studio lighting, façade illumination and lighting for indoor plant cultivation.

(Reporting by Kirsti Knolle in Vienna and Douglas Busvine in Frankfurt; Editing by David Holmes)

Stocks mentioned in the article
ChangeLast1st jan.
AMS 0.74% 47.55 Delayed Quote.100.34%
APPLE -1.46% 217.73 Delayed Quote.38.03%
INFINEON TECHNOLOGIES AG -3.67% 17.426 Delayed Quote.0.35%
NXP SEMICONDUCTORS -3.29% 104.8 Delayed Quote.43.01%
OSRAM LICHT 1.92% 38.17 Delayed Quote.0.66%
SAMSUNG ELECTRONICS CO LTD End-of-day quote.
SIEMENS AG 0.55% 98.01 Delayed Quote.0.65%
VOESTALPINE AG -2.26% 22.45 End-of-day quote.-14.28%
XIAOMI CORP End-of-day quote.
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