By Arno Schuetze and Kirsti Knolle
FRANKFURT/VIENNA, March 16 (Reuters) - AMS shares
fell below the price at which the Austrian sensor maker is
raising new equity on Monday, in the latest hurdle to its
planned purchase of German lighting group Osram.
Austria's AMS began offering new shares at 9.20 Swiss francs
($9.71) on Monday, hoping for proceeds of 1.75 billion Swiss
francs which it needs for the Osram takeover.
But as global equity markets were dragged lower by fears
over the economic impact of the coronavirus pandemic, shares in
AMS fell to 9 Swiss francs, closing 18.4% lower at 9.54 francs.
Sources close to the deal said it was too early to say that
the takeover was in doubt, but acknowledged that it will be a
challenge to persuade investors to buy into the rights issue if
the AMS share price remains at the current level.
"It will be difficult to find buyers. The underwriting banks
may need to take the shares onto their books or look for a
different solution", one of the sources told Reuters.
The banks working for AMS could also call off the rights
issue altogether, according to the agreed deal terms. In that
case, AMS would have to rethink the financing for the bid.
"We are in unchartered waters", the source said.
AMS needs the proceeds to partly repay a 4.4 billion euro
bridge loan, which AMS raised from HSBC, UBS
and Bank of America for the Osram buy.
AMS did not reply to a request for comment. HSBC and UBS,
which are global coordinators on the rights issue, declined to
comment, while Bank of America had no immediate comment.
According to the offer document, the rights issue could be
cancelled in case of "any change in financial markets or any
calamity or crisis... involving a prospective change in national
or international financial, political or economic conditions."
People working on the AMS rights issue stressed markets may
still improve before the offer expires on March 30.
"Investor feedback has been positive so far and there's
still a long way to go", a person close to the deal said.
Volumes in equities markets were still relatively low as
most large portfolio managers were not selling out, he said,
adding that these investors may still be buyers of the new
shares, especially if markets stabilise in the coming days.
Osram shares dropped to 38.75 euros, below the 41 euros
which AMS offered in the takeover bid.
During 2008 financial crisis, German ball bearings maker
Schaeffler borrowed 16 billion euros to buy Continental, nearly
bankrupting itself as it struggled to repay the debt.
($1 = 0.9476 Swiss francs)
(1 euro = 1.0555 Swiss francs)
(Reporting by Arno Schuetze and Kirsti Knolle and Alexander
Huebner; Editing by Alexander Smith)
HSBC Holdings (HSBA)