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AMS re-opens door on Osram bid as recovery continues

AMS re-opens door on Osram bid as recovery continues
FILE PHOTO: A customer uses the new face-recognition software on the new iPhone X inside the Apple Store in Regents Street in London, Britain, November 3, 2017. REUTERS/Peter Nicholls/File Photo -
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Peter Nicholls(Reuters)
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By Kirsti Knolle

VIENNA (Reuters) – Apple supplier AMS kept alive the prospect of a counterbid for German lighting group Osram on Tuesday, as the Austrian company predicted demand for its optical sensors would continue to recover in the third quarter.

AMS said a week ago it did not see “sufficient basis” for continuing its talks with Osram, after approaching the German technology company with a non-binding takeover offer of 38.50 euros per share, or about 3.7 billion euros (£3.3 billion).

However, Swiss-listed AMS said on Tuesday it had been approached by potential financial partners and had exchanged views “which confirm its belief that AMS can arrange prudent and committed financing for this potential transaction.”

Osram, which earlier this month said it was considering a binding offer of 35 euros per share from private equity firms Bain and Carlyle, declined to comment.

AMS’s shares jumped 10% in early trading to a nine-month-high. Osram shares were up 3%. Other European chipmakers including STMicroelectronics and Dialog Semiconductor also gained, helped by news that Apple is in talks to buy Intel’s smartphone-modem chip business.

SMARTPHONEMARKETRECOVERY

AMS, which supplies Apple with sensors for face recognition technology and suffered from lower than expected demand for the latest iPhones late last year, said demand had continued to recover in the second quarter, with revenues rising to $415.2 million (£333.01 million), in the upper half of its $390-430 million guidance.

It expects third-quarter revenue of $600-640 million.

AMS posted second-quarter adjusted earnings before interest and tax of $50 million and said a pick up in consumer market volumes and a better operational performance should lead to an adjusted operating margin of above 25% in the third quarter.

AMS’s third-quarter forecast is ahead of analysts’ expectations and is likely helped by uptake of its VCSEL products, said Mirabaud analyst Neil Campling.

VCSELs, used in the auto industry, are an infrared laser technology that helps to provide a large field of view and the ability to detect small obstacles. AMS entered the highly competitive market in 2017 by buying U.S. firm Princeton Optronics.

Working to reduce its dependency on Apple, AMS is investing heavily in developing products and technologies for the auto industry, such as those that would help with driverless cars.

The chipmaker’s upbeat outlook chimes with comments from industry heavyweights Taiwan Semiconductor and Micron Technology, and from Germany’s Dialog Semiconductor. STMicro is due to report second-quarter results on Thursday.

Mirabaud’s Campling questioned the logic of AMS’s interest in Osram, saying the Austrian firm would have to carve out or sell off Osram’s non-semiconductor operations – which he said accounted for about half of its business – for the deal to make sense.

“The strategic fit with AMS is a stretch in our view,” he said.

Osram, grappling with weakness in the auto industry and a broader economic slowdown, has sparked bid interest because of its potential as a supplier for connected and autonomous cars.

(Reporting by Kirsti Knolle; Additional reporting by Alexander Huebner; Editing by Kirsten Donovan and Mark Potter)

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