Sensor maker AMS bought lighting firm Osram for more than 4 billion euros (3.6 billion pounds) and currently holds 71% in the German group, with which it aims to develop new solutions for mobile communication devices and self-driving cars.

Osram will hold an extraordinary general meeting on Tuesday at which shareholders are expected to approve a domination agreement with AMS, which will give the Austrian company full say over the German group's finances.

According to German law, AMS must offer the remaining Osram shareholders either a cash compensation, which was initially set at 44.65 euros per share, or an annual guaranteed dividend in order to impose a domination agreement.

That dividend has been set at 2.57 euros per share for at least five years. With Osram's share price currently above 51 euros, that corresponds to a yield of around 5%.

The new cash compensation proposal comes after the base interest rate on which Osram's valuation was based changed from 0.0% to -0.1% and aims at keeping it attractive compared with low-risk government bonds, Osram said.

(Reporting by Kirsti Knolle; Editing by Maria Sheahan)