View
4
Download
0
Category
Preview:
Citation preview
Report
on the Audit
of the Domination and Profit and Loss Transfer
Agreement
between
ams Offer GmbH, Ismaning
and
OSRAM Licht AG, Munich
Convenience Translation
This document is a translation of the report “Bericht über die Prüfung des
Beherrschungs- und Gewinnabführungsvertrags zwischen der ams Offer GmbH,
Ismaning, und der OSRAM Licht AG, München“ which was written in German. The
translation was performed by a professional translator. Ebner Stolz GmbH & Co. KG
does not assume any responsibility for the correctness of the translation. The German
version is authoritative for decision-making purposes.
Abbreviations
Abbreviation Full term
AktG Aktiengesetz: German Stock Corporation Act
ams AG ams AG, Premstetten, Austria
ams Offer GmbH ams Offer GmbH, Ismaning
BaFin Bundesanstalt für Finanzdienstleistungsaufsicht:
Federal Financial Supervisory Agency
BGH Bundesgerichtshof: Federal Court of Justice
Bloomberg Bloomberg Finance L.P., New York, USA
BVerfG Bundesverfassungsgericht: Federal Constitutional
Court
CAGR Compound Annual Growth Rate
CAPM Capital Asset Pricing Model
CF Corporate Finance: a trade journal
DB Der Betrieb: a German business administration journal
Ebner Stolz Ebner Stolz GmbH & Co. KG, Wirtschaftsprüfungs-
gesellschaft Steuerberatungsgesellschaft, Stuttgart
EMEA Europe, Middle East and Africa
ECJ European Court of Justice
EUR Euro
EY Ernst & Young GmbH
Wirtschaftsprüfungsgesellschaft, Munich
Abbreviation Full term
FAUB Technical committee for business valuations and
commerce of the Institute of Public Auditors in
Germany
FB Finanz-Betrieb: a German journal on finance
HGB Handelsgesetzbuch: German Commercial Code
IDW Institut der Wirtschaftsprüfer in Deutschland e.V.
[Institute of Public Auditors in Germany], Düsseldorf
IDW-FN IDW Fachnachrichten: Newsletters from the IDW
IFRS International Fincancial Reporting Standards
Ledvance Ledvance GmbH, Garching
LG Landgericht: Regional Court
mEUR Million Euro
OSRAM AG OSRAM Licht AG, Munich
OSRAM Continental OSRAM Continental GmbH, Munich
OLG Oberlandesgericht: Higher Regional Court
PwC PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft, Munich
UmwG Umwandlungsgesetz: Transformation Act
WM Wertpapier-Mitteilung für Wirtschafts- und Bankrecht:
a German journal for commercial law and banking law
notifications related to securities
WPg Die Wirtschaftsprüfung: a German journal for the
auditing profession
Abbreviation Full term
WpÜG-AngebV Verordnung über den Inhalt der Angebotsunterlage, die
Gegenleistung bei Übernahmeangeboten und
Pflichtangeboten und die Befreiung von der
Verpflichtung zur Veröffentlichung und zur Abgabe
eines Angebots: Regulation on the Contents of
Takeover Bids, the Consideration Paid in Takeover
Bids and Mandatory Bids and the Exemption from the
Duty to Publish and Tender a Bid
ZIP Zeitschrift für Wirtschaftsrecht: a German journal for
commercial law
Contents
Page
1. Engagement and Performance of the Engagement 1
2. Purpose, Nature and Scope of the Audit Pursuant to Sec. 293b AktG 5
2.1. Domination and Profit and Loss Transfer Agreement 5
2.2. Joint Report on the Corporate Agreement 5
2.3. Auditor’s Report 5
3. Audit of the Completeness of the Agreement 7
3.1. Registered Names and Offices of the Entities Involved 7
3.2. Management 7
3.3. Profit Transfer 7
3.4. Assumption of Losses (Sec. 302 AktG) 8
3.5. Guaranteed Dividend (Sec. 304 AktG) 8
3.6. Fair Compensation (Sec. 305 AktG) 10
3.7. Duration and Termination of the Agreement 11
3.8. Letter of Comfort 12
3.9. Conclusion 12
4. Audit of the Appropriateness of the Measurement Methods Applied 13
4.1. Equity Value 14
4.2. Liquidation Value 18
4.3. Net Asset Value as Defined by the IDW 19
4.4. Market Price 19
4.5. Comparative Valuations 20
4.6. Prior Acquisitions by ams Offer GmbH 21
4.7. Method Used to Calculate the Fair Compensation 22
4.8. Method Used to Calculate the Guaranteed Dividend 23
4.9. Conclusion 23
5. Methods Used to Audit the Fairness of the Guaranteed Dividend and the Fair
Compensation 24
6. Audit Findings in Detail 26
6.1. Valuation Object 26
6.2. Valuation Date 32
6.3. Capitalized Earnings Value 33
a) Analysis of Historical Results 33
b) Operating Planning 38
c) Other Planning Components 62
d) Terminal Value and Retained Earnings in the Terminal Phase 63
e) Discount Rate 66
f) Growth Factor 80
g) Derivation of the Discount Rate 85
h) Calculation of Equity Value Using the Capitalized Earnings Approach 85
6.4. Separately-Valued Assets 90
6.5. Business Value 91
6.6. Price on the Stock Exchange 91
6.7. Comparative Valuations 94
6.8. Sensitivity Analysis 95
6.9. Particular Difficulties in the Valuation 95
7. Calculation of the Fair Compensation and Guaranteed Dividend 96
7.1. Calculation of the Fair Compensation pursuant to Sec. 305 AktG 96
7.2. Calculation of the Guaranteed Dividend pursuant to Sec. 304 AktG 96
8. Concluding Declaration of the Fairness of the Compensation and Guaranteed Dividend 100
Exhibits
Ruling of the Regional Court of Munich I dated 19 May 2020 Exhibit 1
General Engagement Terms Exhibit 2
For technical reasons the tables may contain rounding differences
of ± one unit (EUR, % etc.)
EOC-Nr. 2020-28263
Dr. Pp/Dr. Rufr/Dr. Unf/Pad
M:\O\OSRAM_3005275_G\OSRAM Licht AG_3005275\Projekte\UBW\2020\BEAV\B Gutachten\Englisch\I1-01-009 DPLTA-Audit Report 23.09.2020 (convenience
translation) final.docx
- 1 -
1. Engagement and Performance of the Engagement
ams Offer GmbH, Ismaning
(hereinafter also referred to as “ams Offer GmbH”)
and
OSRAM Licht AG, Munich
(hereinafter also referred to as “OSRAM AG” or “Company”)
intend to conclude a domination and profit and loss transfer agreement. According to Sec. 293b
AktG, the Agreement must be audited by one or more independent auditors. The Regional Court
of Munich I has appointed us at the joint instigation of both contractual partners to audit the
Agreement pursuant to Sec. 293c AktG by court order dated 19 May 2020 (see Exhibit 2).
Pursuant to Sec. 321 (4a) HGB, we confirm that we observed the applicable laws regarding our
independence during our audit.
In the course of our review, we observed the “Principles for the Performance of Business
Valuations” issued by the Institute of Public Auditors in Germany (“IDW”) released on 2 April 2008
(IDW S1 2008). Moreover, we observed the IDW practice statement 2/2017 “Beurteilung einer
Unternehmensplanung bei Bewertung, Restrukturierungen, Due Diligence und Fairness Opinion“
(evaluation of business planning in the course of business valuations, restructuring, due diligence
and fairness opinions).
When calculating the business value and deriving the compensation payment and guaranteed
dividend, the management of ams Offer GmbH and the managing board of OSRAM AG jointly
engaged the professional services of PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft (hereinafter also referred to as “PwC“ or “Neutral Valuer“), which
issued an expert valuation report on their work. In the course of our audit activities we inspected
the valuation documentation.
The managing board of OSRAM AG and the contact people they named to us willingly provided
us with all the explanations and supporting documentation we requested. The completeness of
the explanations and documentation provided was confirmed to us by the management of ams
Offer GmbH and the managing board of OSRAM AG in a written declaration.
- 2 -
We conducted our audit in the period from 2 June 2020 to 23 September 2020 in the offices of
OSRAM AG in Munich and in our offices in Stuttgart. Although we conducted our audit in parallel
to the work of the Neutral Valuer, PwC, we audited the interim results on the valuation and the
preparatory work for the joint report, coming to our audit opinion independently and at our own
initiative.
The following meetings were held with the Neutral Valuer and representatives of OSRAM AG
and/or ams AG:
Date Participants Topic/Content Place
02.06.2020OSRAM AG, PwC,
Ebner Stolz
Kick-Off and presentation of the business
plan by management of OSRAM AGOffice OSRAM AG, Munich
05.06.2020OSRAM AG, PwC,
Ebner StolzMeeting market position/strategy Telephone/Video conference
09.06.2020OSRAM AG, PwC,
Ebner StolzMeeting past performance Telephone/Video conference
18.06.2020OSRAM AG, PwC,
Ebner StolzMeeting tax planning Telephone/Video conference
19.06.2020OSRAM AG, PwC,
Ebner StolzMeeting market position/strategy Telephone/Video conference
23.06.2020OSRAM AG, PwC,
Ebner Stolz
Meeting planning business unit OS with
BU managementTelephone/Video conference
29.06.2020OSRAM AG, ams AG,
PwC, Ebner Stolz
Meeting planning business unit AM and DI
with BU management
Office OSRAM AG, Munich/
Telephone/Video conference
30.06.2020OSRAM AG, PwC,
Ebner StolzMeeting Peer Group Telephone/Video conference
09.07.2020OSRAM AG, PwC,
Ebner StolzMeeting planning OSRAM Continental
Office OSRAM AG, Munich/
Telephone/Video conference
22.07.2020 PwC, Ebner StolzMeeting different topics concerning
ModelOffice PwC, Munich
22.07.2020OSRAM AG, PwC,
Ebner Stolz
Q&A planning business unit DI with BU
managementTelephone/Video conference
23.07.2020OSRAM AG, PwC,
Ebner Stolz
Q&A planning business unit OS with BU
managementTelephone/Video conference
27.07.2020OSRAM AG, PwC,
Ebner Stolz
Explanation long-term profitability targets
by management of OSRAM AGOffice OSRAM AG, Munich
28.07.2020OSRAM AG, PwC,
Ebner Stolz
Q&A planning business unit AM with BU
managementTelephone/Video conference
20.08.2020OSRAM AG, PwC,
Ebner StolzExplanation potential for synergies Telephone/Video conference
26.08.2020ams AG, PwC, Ebner
Stolz
Explanation long-term profitability targets
by management of ams AGTelephone/Video conference
10.09.2020OSRAM AG, ams AG,
PwC, Ebner Stolz
Presentation of updated business plan by
management of OSRAM AGOffice OSRAM AG, Munich
- 3 -
In addition, numerous meetings and telephone calls were held at a working level over the entire
course of our audit work on the various issues relevant to the valuation.
The audit of the corporate agreement was managed and performed by the two auditors signing
this report. They were supported by a manager experienced in business planning and valuation
issues, a senior consultant and a consultant.
Should there be any material changes in the assets, liabilities, financial position or financial
performance, or any other basis used for the valuation of OSRAM AG in the period between the
conclusion of our audit and the prospective date of 3 November 2020 on which the extraordinary
general meeting of OSRAM AG passes a resolution on the Domination and Profit and Loss Transfer
Agreement, then these must be considered in the measurement of the guaranteed dividend and
the compensation payment.
We make express reference to the fact that our audit activities did not extend to the accounting,
financial statements, management reports, consolidated financial statements, group management
reports or the management of OSRAM AG. Pursuant to Sec. 293b AktG, a review of this nature is
not included in the scope of our activities. The compliance of the financial statements of OSRAM
AG (pursuant to HGB) and the consolidated financial statements (pursuant to IFRS) with the
relevant legal requirements was confirmed by the independent auditors of EY engaged to perform
this task.
Execution of the assignment and the extent of our responsibility and liability is governed by the
“General Engagement Terms for Wirtschaftsprüfer and Wirtschaftsprüfungsgesellschaften” dated
1 January 2017 attached to this report as Exhibit 3. In addition to the statutory limitation of liability
found in Sec. 293d (2) AktG in conjunction with Sec. 323 HGB, the General Engagement Terms
also govern our responsibilities to third parties.
The sole purpose of this audit report is to serve as an informative basis to be used by the
companies involved in the Domination and Profit and Loss Transfer Agreement for their decisions
as well as by their consultants and legal advisors and the court which engaged us to conduct the
audit or any courts hearing disputes related to the Domination and Profit and Loss Transfer
Agreement. In addition, a copy of this report may be provided to the minority shareholders of
OSRAM AG and also published on the website of OSRAM AG for this purpose. It may not be used
for any other purposes.
- 4 -
The following documents were made available for our audit, among others:
▪ Joint report issued by the management of ams Offer GmbH and the managing board of
OSRAM AG on the Domination and Profit and Loss Transfer Agreement between ams Offer
GmbH and OSRAM AG (as at 22 September 2020),
▪ Domination and Profit and Loss Transfer Agreement dated 22 September 2020 (Exhibit 1),
▪ Report from PwC on the business valuation of OSRAM AG dated 21 September 2020
(including prior drafts) attached to the joint report as Annex 4,
▪ Reports from EY on the audit of the separate financial statements and management report of
OSRAM AG for fiscal years 2017 to 20191,
▪ Reports from EY on the audit of the IFRS consolidated financial statements and group
management report of OSRAM AG for fiscal years 2017 to 2019,
▪ Annual reports of OSRAM AG for the fiscal years 2017 to 2019,
▪ Financial planning statements of OSRAM AG for the fiscal years 2020 to 2025 and the
underlying planning assumptions dated 7 September 2020, and forecast for the fiscal year
2020 dated 16 September 2020 (“financial planning statements”),
▪ Business planning of key income statement figures for the business units OS, AM and DI of
OSRAM AG for the fiscal years 2020 to 2025,
▪ Documents concerning the identification and assessment of synergy potentials on the part of
OSRAM AG and ams AG, Premstätten (“ams AG“),
▪ Internal analyses from the management accounting (controlling department) of OSRAM AG,
▪ Combined minutes of the managing board meetings from 8 March 2019 to 15 July 2020 and
the agenda of the meetings of the supervisory board from 7 May 2019 to 17 June 2020 (all
inspected on site),
▪ The articles of association of OSRAM AG,
▪ Excerpt from the entry in the commercial register of OSRAM AG,
▪ Excerpt from the entry in the commercial register of ams Offer GmbH,
▪ Various market and industry-related publications,
▪ Valuation papers of PwC,
▪ Publicly available information, capital market data in particular.
1 The annual dates relate to the calendar year in which the respective fiscal year of OSRAM AG ends, which
does not equate with the calendar year.
- 5 -
2. Purpose, Nature and Scope of the Audit Pursuant to Sec. 293b
AktG
2.1. Domination and Profit and Loss Transfer Agreement
The subject of this audit, performed in accordance with Sec. 293b AktG, is the Domination and
Profit and Loss Transfer Agreement or its draft version. This Agreement (or its draft version) must
be audited to determine the completeness and accuracy of the information it contains and, in
particular, whether the proposed guaranteed dividend and compensation are fair. The German
terms “Ausgleich” and “Ausgleichszahlung” as defined by Sec. 304 AktG have been uniformly
translated as “guaranteed dividend”.
2.2. Joint Report on the Corporate Agreement
According to Sec. 293a AktG, the legal representatives of each of the companies participating in
the Domination and Profit and Loss Transfer Agreement must issue a detailed written report
explaining the legal and economic aspects of the corporate agreement, the details of the
agreement and, in particular, the amount and type of guaranteed dividend pursuant to Sec. 304
AktG and the compensation payment pursuant to Sec. 305 AktG. For this reason, the managing
board of OSRAM AG and the management of ams Offer GmbH have issued a joint report on the
Domination and Profit and Loss Transfer Agreement between OSRAM AG and ams Offer GmbH.
This report must make special mention of any particular difficulties in valuing the companies that
are party to the Agreement and the consequences for the equity interests of the shareholders.
In the course of our work, we audited the disclosures on the subject of the audit and the
methodical and computational explanations and justifications of the business value of the
dependent company and the proposed guaranteed dividend and cash compensation derived on
this basis contained in the joint report on the corporate agreement and the attached valuation
report as well as the – earlier – draft versions of the joint report and valuation report. An audit of
the completeness and accuracy of the joint report as well as the suitability of the Domination and
Profit and Loss Transfer Agreement for the stated purpose were not within the scope of our audit
engagement.
2.3. Auditor’s Report
As auditors, we report in writing pursuant to Sec. 293e AktG on the findings of our audit in
accordance with our professional standards.
- 6 -
The focus of the audit of the corporate agreement is placed on an assessment of the proposed
guaranteed dividend and the proposed compensation payment. The auditor must review whether
the methods applied by the legal representatives to determine the guaranteed dividend and the
compensation payment are suitable. In particular, if the valuation is based on a forward-looking
analytical business valuation methodology, the audit must review whether the business valuation
on which the proposed guaranteed dividend and severance payment is based, comply with
generally accepted principles of business valuations, whether the data on which these valuations
are based have been professionally derived and whether the forecasts used are plausible. If the
share prices quoted on the exchange are used to derive the compensation payment, the method
used to derive the exchange price must be assessed.
Sec. 293e (1) sentence 3 AktG makes it clear that an auditor of a corporate agreement is not
obliged to carry out another independent business valuation. Rather, the auditor can restrict his
activities to reviewing the plausibility of the business valuation on which the proposed
compensation is based, including the report on the business valuation (see Emmerich/Habersack,
Aktien- und GmbH-Konzernrecht, 9th edition 2019, Sec. 293 b, No. 17 with further references;
Servatius, in: Grigoleit, Aktiengesetz, 2nd edition 2020, Sec 293b No. 6; OLG Stuttgart, 17 October
2011, 20 W 7/11, No. 232 (juris); LG Munich I, 28 August 2008, 5 HKO 2522/08, AG 2008, pp. 904,
908).
According to Sec. 293e (1) sentence 2 AktG, the auditor’s report must conclude with a declaration
of whether the proposed guaranteed dividend and the proposed compensation are fair. The
following must be included in the report:
1. which methods were used to determine the guaranteed dividend and the fair compensation
2. the reasons why application of these methods is appropriate, and
3. if more than one method has been applied, the respective guaranteed dividends and
compensation payments resulting from the various methods. At the same time, the report
must illustrate which weighting has been given to the various methods when determining the
proposed guaranteed dividend or the proposed compensation payment and the underlying
values and indicate any particular difficulties arising in the valuation.
- 7 -
3. Audit of the Completeness of the Agreement
The minimum requirements of a Domination and Profit and Loss Transfer Agreement are defined
in Secs. 291 et seq. AktG. The audit of the completeness and accuracy of the Domination and
Profit and Loss Transfer Agreement therefore relates to the general disclosures on the parties to
the agreement, the definition of the subject of the agreement, its inception and duration of the
agreement as well as the agreements on the guaranteed dividend and compensation payment.
3.1. Registered Names and Offices of the Entities Involved
The registered names of the companies who are parties to the Domination and Profit and Loss
Transfer Agreement and the addresses of their registered offices are stated in the Agreement and
agree with the entries in the commercial register.
3.2. Management
According to § 1 of the Agreement, OSRAM AG subordinates its management to ams Offer GmbH.
ams Offer GmbH is entitled to instruct the managing board of OSRAM AG with regard to the
management of the Company. ams Offer GmbH cannot issue instructions to the managing board
of OSRAM AG to amend, maintain, or terminate the Agreement. These contractual arrangements
comply with the requirements of Sec. 291 (1) sentence 1, and Sec. 299 AktG.
3.3. Profit Transfer
The obligation to transfer profits for the full fiscal year of OSRAM AG originates in the year in
which the Profit and Loss Transfer Agreement first comes into effect (see § 2.3 of the Agreement).
- 8 -
According to § 2 of the Agreement, OSRAM AG agrees to transfer its full profit to ams Offer GmbH.
Pursuant to § 2 of the Agreement and in accordance with the statutory provisions of Sec. 301 AktG,
in the applicable version, any net profit generated in the year (prior to the transfer of profits) is to
be transferred as profit after deducting any losses carried forward from the prior year, the amount
to be added to statutory reserves pursuant to Sec. 300 AktG, and the amount barred from
distribution in accordance with Sec. 268 (8) HGB. With the agreement of ams Offer GmbH, OSRAM
AG may allocate other portions of the net profit for the year to revenue reserves, provided this is
permitted under commercial law and makes sense from the perspective of due fiscal prudence.
Any revenue reserves created during the term of the Agreement must be released upon written
request from ams Offer GmbH and used to offset any loss incurred or be transferred as profit.
The obligation to transfer profit becomes due at the end of each fiscal year of OSRAM AG, and
bears interest of 5% p.a. from that date onwards. These provisions satisfy the statutory
requirements of Sec. 291 (1) sentence 1, and Sec. 301 in conjunction with Sec. 300 No. 1 AktG.
With regard to the timing differences between the origination of the right to receive the profit
transfer and the right of non-controlling interests to receive compensation, the Federal Court of
Justice found that equal treatment of non-controlling interests whose right to a guaranteed
dividend falls due pursuant to § 4.2 of the Agreement, is not possible vis à vis the controlling
company, nor necessary (see BGH, 19 April 2011, II ZR 237/09 No. 14 (juris)).
3.4. Assumption of Losses (Sec. 302 AktG)
According to § 3.1 of the Agreement, ams Offer GmbH is obliged to assume losses in accordance
with the applicable version of Sec. 302 AktG.
The dynamic aspect of this clause corresponds in full to the requirements of Sec. 302 AktG.
According to § 3.2 in conjunction with § 2.3 of the Agreement, the right to compensation of the
net loss for the year falls due upon the closing date of the fiscal year of OSRAM AG, and bears
interest of 5% p.a. from this date onwards. This arrangement complies with the legal requirements
and the court rulings.
3.5. Guaranteed Dividend (Sec. 304 AktG)
ams Offer GmbH is obliged from the fiscal year in which the right to a profit transfer becomes
effective, i.e. most likely from 1 October 2020, to pay an annual guaranteed dividend for the
duration of the corporate agreement.
- 9 -
The guaranteed dividend amounts to EUR 2.57 for each no-par share in OSRAM AG less corporate
income tax and solidarity surcharge on the basis of the tax rate for the respective fiscal year,
whereby these taxes are only deducted from the share of the profit burdened by German
corporate income tax contained in the before tax guaranteed dividend of EUR 2.08 per no-par
share.
The guaranteed dividend is due for payment on the first bank-day following the annual general
meeting of OSRAM AG for the preceding fiscal year. Furthermore, the guaranteed dividend falls
due for payment no later than eight months after the close of the respective fiscal year.
In its benchmark decision on 19 April 2011 (II ZR 237/09, No. 8 (juris)), the Federal Court of Justice
ruled that the right to a guaranteed dividend arises every year upon the end of the annual general
meeting following the close of the fiscal year, provided that, as in this case, the contractual
agreement does not make some other arrangement (supported by OLG Stuttgart, 3 April 2012,
20 W 6/09, No. 90 (juris).
The payment of a guaranteed dividend corresponds to the legal requirements of Sec. 304 (1)
Sentences 1 and 2 AktG.
Reference is made to section 7 with regard to the calculation of the guaranteed dividend.
The guaranteed dividend is granted for the first fiscal year in which the right to a profit transfer
arises. Pursuant to § 2.3 of the Agreement, this will be in the fiscal year 2021 of OSRAM AG,
assuming the Agreement becomes effective upon being entered in the commercial register in
2020.
The guaranteed dividend is reduced on a pro rata basis in the event that the contract is terminated
during a fiscal year of OSRAM AG or OSRAM AG creates an abbreviated fiscal period during the
period in which it is obliged to transfer its profits (§ 4.3 of the Agreement).
The Agreement does not include any arrangement for a pro rata temporis allocation of the
guaranteed dividend if, for example, the minority shareholders are squeezed out during a fiscal
year. With regard to the squeeze-out proceeding under the German Stock Corporation Act, the
Federal Court of Justice found that there is no right to payment of a guaranteed dividend on a
pro rata temporis basis (see BGH, 19 April 2011, II ZR 237/09, benchmark decision and No. 8
(juris)). The Domination and Profit and Loss Transfer Agreement does not terminate upon a
squeeze-out (see OLG Stuttgart, 3 April 2012, 20 W 6/09, No. 95). Owing to a lack of a contractual
arrangement or legal regulation, the minority shareholders do not have any right to a pro rata
temporis payment of the guaranteed dividend in the event of a squeeze-out.
- 10 -
In the event that the issued capital of OSRAM AG is increased from company funds by the issue
of new shares, § 4.4 of the Agreement stipulates that the guaranteed dividend is reduced in such
a way that the sum total of all guaranteed dividends remains unchanged. In the prevailing opinion,
such a reduction applies by force of law even without any corresponding contractual arrangement.
In the event of a capital increase from a cash contribution and/or contribution in kind then the
new shares are also entitled to an annual guaranteed dividend. This too corresponds to the
prevailing opinion in the legal literature.
§ 4.5 of the Agreement corresponds to Sec. 13 SpruchG [Spruchverfahrensgesetz: German act on
the procedures to be applied for certain corporate law disputes] whereby the decision of the court
applies to all parties, including those shareholders who have already left the legal entity concerned
after accepting the original compensation payment arising from the Domination and Profit and
Loss Transfer Agreement or some other settlement. Likewise, all other minority shareholders are
treated equally if ams Offer GmbH agrees to pay a higher guaranteed dividend to another
shareholder of OSRAM AG in the course of a court settlement or to avoid or terminate court
proceedings.
3.6. Fair Compensation (Sec. 305 AktG)
According to § 5.1 of the Agreement, ams Offer GmbH agrees to acquire the no-par value shares
of a minority shareholder of OSRAM AG in consideration for payment of EUR 44.65.
The choice of the type of the compensation is based on Sec. 305 (2) No. 3 AktG and is therefore
in agreement with Sec. 305 AktG.
According to § 5.2 of the Agreement, the obligation to purchase such shares is only for a limited
term, ending two months after the day on which a public announcement pursuant to Sec. 10 HGB
is made that the contract has been filed with the commercial register of OSRAM AG. This
contractual arrangement complies with the requirements of Sec. 305 (4) sentence 2 AktG. Due to
the law and corresponding contractual arrangements, an announcement of the court’s decision
in the Federal Gazette may take the place of the above announcement if an application has been
filed to have the guaranteed dividend and/or compensation payment determined under the rules
of the SpruchG (Sec. 305 (4) sentence 3 AktG).
- 11 -
If, by the expiry of the period defined in § 5.2 of the Agreement, the share capital of OSRAM AG
is increased from company funds by issue of new shares, the compensation paid per share shall
decrease in such a way that the total amount of all compensation paid remains the same. If the
issued capital of OSRAM AG is increased by cash contribution and/or contribution in kind, then
the rights under § 5 of the Agreement also apply to the new shares subscribed to by the minority
shareholders from the new share issue (§ 5.3 of the Agreement).
The Agreement does not govern the issue of interest. In this case the law requires interest to be
paid on the compensation after expiry of the day on which the Domination and Profit and Loss
Transfer Agreement takes effect at a rate of 5 percentage points above the respective base rate
as defined by Sec. 247 BGB, without thereby affecting any claims for further damages (Sec. 305
(3) sentence 3 AktG).
§ 5.4 of the Agreement governs the settlement of the fair compensation. There are no legal
requirements in this regard.
In the event of a court settlement under the terms of the SpruchG, in which a court orders a higher
fair compensation payment, the shareholders who have already accepted a settlement can
demand a corresponding step-up of their compensation payments. Likewise, all other minority
shareholders are treated equally if ams Offer GmbH agrees to pay a higher compensation
payment to another shareholder of OSRAM AG in the course of a court settlement or to avoid or
terminate court proceedings (§ 5.5 of the Agreement).
3.7. Duration and Termination of the Agreement
In agreement with the applicable law, § 6.1 and § 6.2 of the Agreement state that the Agreement
requires the prior approval of the annual general meeting of OSRAM AG and the shareholders’
meeting of ams Offer GmbH. The Agreement comes into force upon being entered into the
commercial register of OSRAM AG.
§ 6.3, § 6.4 and § 6.5 of the Agreement govern the duration and termination of the Domination
and Profit and Loss Transfer Agreement. There are no requirements in the law with regard to the
duration or termination of a domination and profit and loss transfer agreement.
- 12 -
3.8. Letter of Comfort
§ 7 of the Agreement refers to the letter of comfort issued by ams AG, the sole shareholder of
ams Offer GmbH. Without acceding to the Agreement itself, ams AG agrees to ensure that ams
Offer GmbH is provided with the financial resources it needs to meet its obligations to pay the
guaranteed dividend and the compensation payments in full as they fall due.
The letter of comfort is attached to the Domination and Profit and Loss Transfer Agreement as an
annex.
In contrast to a squeeze-out, in which the compensation payment is secured by a bank guarantee
pursuant to Sec. 327b (3) AktG, the law governing corporate agreements does not consider any
guarantees.
In this case, the credit rating of ams AG has an impact via the letter of comfort on the other party
to the Agreement, namely ams Offer GmbH, and therefore provides additional security to the
minority shareholders.
3.9. Conclusion
Based on our audit, we have found that the Domination and Profit and Loss Transfer Agreement
contains the full and proper components as required by Sec. 291 et seq. AktG, and therefore
complies with statutory requirements.
- 13 -
4. Audit of the Appropriateness of the Measurement Methods
Applied
The guaranteed dividend and the fair compensation are based on the findings of the business
valuation unless a higher share price obtainable on the stock exchange applies for the fair
compensation in light of the rulings of the highest court. Section E of the report on the Agreement
contains comments on how the fair compensation and guaranteed dividend were arrived at and
justified.
The valuation report, which is integrated in the joint report as Annex 4, states that the valuation
standards which have been applied comply with the standards of business valuation now generally
accepted in both theory and practice as reflected in the statements issued by the IDW, in
particular, the IDW Standard, “Principles for the Performance of Business Valuations” (IDW
S1 issued in 2008). In order to derive the arithmetical cash compensation, the companies were
valued by applying the capitalized earnings value (Ertragswertverfahren).
According to prevailing court rulings and generally accepted valuation practice, which this
business valuation is based on, the guaranteed dividend and fair compensation should be derived
from an objectified measure of the business value. The objectified business value represents the
“inter-subjective” verifiable value of future earnings from the perspective of the various
shareholders which would result when the company continues to operate under its existing
business model. Should the business valuation be required under company law or for contractual
reasons, the valuation is performed from the perspective of the shareholder as a natural domestic
tax-payer subject to unrestricted tax in Germany (IDW S1 2008 No. 31).
As explained in detail below, we are of the opinion that the presentations and comments in the
joint report relating to the valuation method used and the decision about the amount of the
guaranteed dividend and the compensation payment are accurate.
- 14 -
4.1. Equity Value
Assuming the exclusive pursuit of financial objectives, the value of a company is determined by
the present value of the net inflows to the shareholders. The value of future earnings is basically
the result of the free cash flow which can be generated from continuing the company’s operations.
The liquidation value of any non-operating assets must be added to this. The net present value of
these surpluses is derived by applying a discount rate that equates with the return of an
investment that can be reasonably taken as an adequate alternative investment to an investment
in the company being valued.
The present value of future earnings is thus the theoretically correct value of an enterprise.
According to IDW S1 2008 No. 7 the business value, as a value of future earnings, can be
determined using the capitalized earnings method or the discounted cash flow method. In this
case the business value of OSRAM AG has been determined by PwC using the capitalized earnings
method which is most commonly used in practice in Germany and recognized by the courts.
Considering the fact that both methods lead to the same business value if the underlying
assumptions are identical, particularly with regards to financing and risk content of the tax shield,
as well as the use of suitable formulas to adjust the beta factor to the capital structure (see IDW
S1 (revised) No. 101), the Neutral Valuer has refrained from applying the discounted cash flow
method in addition to the capitalized earnings method.
In spite of the general acceptance of the capitalized earnings method, it should be noted that this
model is associated with a number of uncertainties. For this reason, the business valuation
presented to us by PwC cannot determine the mathematically exact or true business value as at
the valuation date (see BVerfG, 24 May 2012, 1 BvR 3221/10, No. 30 (juris); BGH, 29 September
2015, II ZB 23/14/14, No. 36 (bundesgerichtshof.juris); OLG Munich, 14 July 2009, 31 Wx 121/06,
No. 10 (juris)). The numerous forward-looking estimates and individual decisions in the method
are not commensurate to an assessment of accuracy but rather to an assessment of
reasonableness (see OLG Munich, 2 September 2019, 31 Wx 358/16, No. 34 (BeckRS); OLG
Stuttgart, 17 October 2011, 20 W 7/11, No. 179 (juris)).
- 15 -
The valuation of OSRAM AG was performed on a stand-alone basis in keeping with the prevailing
opinion of the courts and professional practice (see OLG Munich, 2 September 2019, 31 Wx
358/16, No. 81 (BeckRS); OLG Frankfurt, 28 March 2014, 21 W 15/11, No. 146 (juris); OLG Stuttgart,
5 June 2013, 20 W 6/10, No. 169 (juris); Popp, AG 2010, pp. 1, 2; van Rossum, in: Münchener
Komm. zum AktG, 5th edition, 2020, § 305 No. 171; Koch, in Hüffer/Koch, AktG, 14th edition, 2020,
§ 305 No. 33; krit.: Krieger, in: Münch. Hdb. AG, 4th edition, 2015, § 71, No. 135; Emmerich, in:
Emmerich/Habersack, Aktien- und GmbH-Konzernrecht, 9th edition, 2019, § 305 No. 70a, 71).
Consequently, any effects that only arise from the execution of the structural measure do not need
to be considered during the valuation. The right to a fair guaranteed dividend and a fair
compensation payment does not endow the holder with any rights to participate in the benefits
that would not exist without the corporate agreement (see LG Stuttgart, 17 September 2018, 31 O
1/15, ratio decidendi p. 84).
When considering potential synergies, the courts and also IDW S1 make a distinction between
genuine synergies and pseudo (non-genuine) synergies (for details see Popp/Ruthardt, § 12
Bewertungsmethoden im Spiegel der Rechtsprechung, in: Fleischer/Hüttemann, Rechtshandbuch
Unternehmensbewertung, 2nd edition 2019, No. 12.25 et seq.). Genuine synergies are to be
ignored in an objectified valuation (see OLG Stuttgart, 3 April 2020, 20 W 2/17, ratio decidendi p.
21; OLG Munich, 26 June 2018, 31 Wx 382/15, No. 46 (BeckRS); OLG Frankfurt, 26 January 2017,
21 W 75/5, No. 61 (BeckRS)). These only arise when the structural measures underlying the
valuation are executed (in this case a domination and profit and loss transfer agreement). In other
words, genuine synergies cannot be realized without executing the structural measure, which is
the very reason for the valuation. Pseudo synergies, on the other hand, are characterized by the
fact that they can be realized without executing the domination and profit and loss transfer
agreement (see WPH Edition, Bewertung und Transaktionsberatung, 2018, Chap. C, No. 120). OLG
Munich has stressed, justifiably so, that hypothetical future developments do not provide a
sufficiently sound basis for forecasting the future earnings of the business being valued (31 March
2008, 31 Wx 88/06, No. 22 (juris)).
To specify, it is advisable in the context of corporate agreements to make a distinction between
pre-contractual synergies and contractual synergies. Pre-contractual synergies are those that
can be generated within the existing structure of the group (Sec. 311 et seq. AktG), even without
any corporate agreement being made (i.e. pseudo synergies/synergies independent of the
structural measure concerned: LG Stuttgart, 17 September 2018, 31 O 1/15, ratio decidendi, p. 85).
By contrast, contractual synergies require additional action to be taken before they can be
realized, whereby such measures can only be effected upon conclusion of a domination and profit
and loss transfer agreement (see Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der
Rechtsprechung, in: Fleischer/Hüttemann (publisher), Rechtshandbuch Unternehmensbewertung,
2nd edition 2019, No. 12.28).
- 16 -
A joint analysis was conducted by ams and OSRAM with regard to potential measures. In the
course of this analysis, planned integration projects were examined to determine the extent to
which they were realizable even without the corporate agreement and what economic benefits
could be realized by such projects for the companies involved. Within the scope of our audit
procedures we discussed the issue of synergies with both the managing board of OSRAM AG and
the management of ams Offer GmbH (see LG Munich I, 27 November 2019, 5 HK O 6321/17, ratio
decidendi, p. 55). For more information see our comments in Section 6.3.b).
Integrated business planning considers the planned investments, the distribution policy, retained
earnings and the financial policy of the organization. If the business plan reveals a temporary need
for more capital after exploiting planned borrowings, this could be financed by not distributing
profits. This form of internal financing in the detailed planning phase (actual retention of
earnings) can be used to repay liabilities or make the investments required for business
operations. Pursuant to IDW S1 2008, No. 35 when determining objectified business values, an
assumption is made that all financial surpluses will in fact be distributed that are available for
distribution after considering the documented business concept and legal restrictions. The volume
of distributions is reflected in the valuation as the value added from distributions. In the
continuation phase (known as the terminal value) a standardized assumption is made that the
distribution patterns of the valuation object are equivalent to the distribution patterns of the
alternative investment.
In the terminal value, it is generally assumed that there will be inflation-induced growth. Even if
all financial surpluses are distributed (sometimes referred to as fictitious full distribution) the
capital remaining in the company is subject to inflation-induced growth. Consequently, the assets
and liabilities presented in the final balance sheet of the detailed planning phase are rolled
forward in the terminal value considering a growth factor for inflation (see WPH Edition:
Bewertung und Transaktionsberatung, 2018, Chap. A No. 455). To finance growth in the terminal
value, certain components of the sustainable net income must definitely be retained otherwise it
would be impossible for the company’s leverage to reach a steady state. This is referred to as
growth-related retention of earnings (see Popp Der Konzern 2019, pp. 105, 108 et seq.;
Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der Rechtsprechung, in:
Fleischer/Hüttemann (publisher), Rechtshandbuch Unternehmensbewertung, 2nd edition 2019
No. 12.56).
- 17 -
If the net profit for the year is retained (or a portion thereof) without there being any specific
plans for its use, this is within the framework of the capitalized earnings model customarily treated
as an economically reasonable net present value neutral reinvestment (see IDW S1 2008, No. 37).
These funds, which are not actually distributed, can be modeled by a fictitious direct allocation to
the shareholders and constitute the value added from retained earnings. The (fictitious)
investment of these amounts at the level of the company results in additional income in the years
following their initial retention. From the perspective of a typified shareholder, the fictitious direct
allocation represents an assumed gain on sale from a tax perspective, which is subject to a lower
effective tax burden from personal income taxes for the purpose of the valuation. Moreover,
inflation-induced gains on sale need to be considered when deriving the net financial surpluses
(see Popp, Berücksichtigung von Steuern, in: Peemöller (publisher), Praxishandbuch der
Unternehmensbewertung, 7th edition, 2019, pp. 1425, 1437 et seq.; Popp, Der Konzern 2019,
pp. 149 et seq.).
Due to the fact that the business value is determined from the perspective of a shareholder, the
shareholders’ tax burden incurred on the dividends and the gains on sale must be considered.
The value of future earnings is determined by discounting future distributable cash flows using
the cost of capital. Here too, the tax effect at shareholder level must be taken into consideration.
In our opinion and according to the professional standards of business valuations, the yield
obtained from a stock portfolio must be taken as an alternative investment and the average tax
burden incurred on such returns must be calculated (IDW S1 2008, No. 93).
Non-operating assets which can be sold separately without affecting the operations of the
company (criteria of a functional distinction) are considered at their liquidation value after
deducting selling costs and the tax impact of the sale at company level. To what extent taxes need
to be considered at the level of the owners depends on the intended use of the profits generated
(see IDW S1 2008, No. 61). Neither the possibility of a non-recurring tax-free share repurchase
discussed in earlier years nor the reinvestment of earnings at the same rate of return until the
liquidation proceeds are distributed to the shareholders (see: Wagner et al., WPg 2006, pp. 1005,
1022) are possible without incurring income tax under the current withholding tax regime that is
relevant for OSRAM AG. If it is assumed that earnings or non-essential liquidity are distributed to
the owners, this normally entails consideration of (typified) personal income taxes of the
shareholder in the valuation (see Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der
Rechtsprechung, in: Fleischer/Hüttemann, Rechtshandbuch Unternehmensbewertung, 2nd
edition. 2019, No. 12.156; Popp, Der Konzern 2020, pp. 177, 179 with additional comments).
- 18 -
4.2. Liquidation Value
According to the Principles for the Performance of Business Valuations, the liquidation value must
be determined alternatively to the capitalized earnings value (“equity value”) if the net present
value of financial surpluses resulting from a liquidation of the company exceeds the equity value
assuming the company is a going concern (see IDW S1 2008, No. 5).
According to the court rulings, the liquidation value should be applied only if there is an intention
to actually liquidate the company and the earnings forecasts of the company are negative for a
sustained period (see BGH ruling dated 18 September 2006, II ZR 225/04, AG 2006 pp. 887, 889;
OLG Munich, 30 July 2018, 31 Wx 122/16, ratio decidendi p. 14; OLG Munich, 17 July 2014,
31 Wx 407/13, p. 6 (BeckRS); OLG Düsseldorf, 10 June 2009, 26 W 1/07, Nos. 96 et seq. (juris); OLG
Düsseldorf, 29 July 2009, 26 W 1/08, No. 37 (juris)).
However, more recent court rulings not only make a distinction as to whether there is an intention
to liquidate the company but also on the basis of the reasons and circumstances of companies
remaining in business, even if they may be unprofitable. If there is a legal or de facto necessity to
keep the company in business (see OLG Düsseldorf, 28 January 2009, 26 W 7/07, AG 2009, pp.
667, 668), then the liquidation value can be ruled out as a measure of the business value. Neither
of these cases apply in the current case.
According to the IDW, if the liquidation value exceeds the going concern value, the liquidation
value represents the lower limit for the business value (see IDW S1 2008, No. 40). This constellation
can arise particularly in the case of weak earnings. On this topic, WPH Edition states the following:
“If optimum business policies are assumed, a company must always be liquidated when its going
concern value is lower than its liquidation value, i.e. when liquidation (and ensuing reinvestment
elsewhere) leads to higher financial surpluses than continuing the business using the business
policies that are actually planned. However, if, in reality, a company continues in business even
though its liquidation value exceeds its going concern value, this can be explained by the fact that
subjective or non-financial factors take precedence in the reasoning of the owners or that
management does not pursue the optimum business policies for the shareholders” (see IDW, WPH
Edition, Bewertung und Transaktionsberatung, Chap. A No. 155).
As an objectified business valuation should distance itself from such non-financial factors, “the
(lower) going concern value may only be applied when there is a legal or de facto requirement to
continue the business (e.g. a requirement of testamentary obligations, public law obligations,
pressure of public interest). In all other cases, the liquidation value represents the lower limit for
the business valuation” (see WPH Edition, Bewertung und Transaktionsberatung, 2018, Chap. A
No. 156).
- 19 -
The Neutral Valuer made an approximate calculation of the liquidation value of OSRAM AG. We
assessed the calculations and underlying considerations. In conclusion it can be assumed that the
liquidation value in this case is not relevant for deriving the business value.
4.3. Net Asset Value as Defined by the IDW
In contrast to the liquidation value, the net asset value as defined by the IDW is without any
informative value when determining the overall value of a going concern, even if there are plans
to liquidate the business (see IDW S1 2008, No. 6.; OLG Stuttgart, 14 September 2011, 20 W 6/08,
No. 202 (juris); OLG Düsseldorf, 28 January 2009, 26 W 7/07, AG 2009, pp. 667, 668; Popp/Ruthardt,
§ 12 Bewertungsmethoden im Spiegel der Rechtsprechung, in: Fleischer/Hüttemann (publisher),
Rechtshandbuch Unternehmensbewertung, 2nd edition 2019, No. 12.162;
Großfeld/Egger/Tönnes, Recht der Unternehmensbewertung, 8th edition, 2016, p. 329; LG Munich,
14 February 2014, 5 HK O 16505/08, ratio decidendi p. 64). Even in the case where a liquidation is
planned, the liquidation value should be used, not the net asset value. It was therefore not
necessary to determine the net asset value.
4.4. Market Price
The shares of OSRAM AG are admitted to trading on the regulated market of the stock exchanges
in Frankfurt a.M. and Munich and are also traded on the electronic trading platform, Xetra.
Moreover, they are traded on the open market at the exchanges of Berlin, Düsseldorf, Hamburg,
Hanover, Munich, Stuttgart, Vienna and the Tradegate Exchange (based in Berlin). For this reason,
the share price is fundamentally an option for measuring a fair compensation or setting its lower
limit.
In its DAT/ALTANA ruling dated 27 April 1999 (1 BvR 1613/94, AG 1999 pp. 566 et seq.), the
Federal Constitutional Court emphasized the relevance of market prices for establishing the lower
limit for calculating the fair compensation in cases where a profit transfer agreement is to be
concluded, and also for corporate integrations.
- 20 -
Use of the market price as the lower limit for the compensation can be justified from a commercial
perspective. The potential divestment value, or more exactly, the divestment price is relevant for
setting the lower limit. The divestment price is the price at which an individual share (not a bundle
of shares or the company as a whole) could be sold – actually and voluntary – on the market,
divorced from the structural measure (for details on the relevance of the market price, see
Ruthardt/Popp, AG 2020, pp. 240, 244 et seq.). The criteria of Sec. 5 (4) WpÜG-AngebV can be
used as an indication when reviewing the voluntary saleability (see OLG Karlsruhe, 12 September
2017, 12 W 1/17, No. 33 (BeckRS); OLG Frankfurt a.M., 28 March 2014, 21 W 15/11, AG 2014, p.
822; LG Stuttgart, 8 May 2019, 31 O 25/13, No. 294 (BeckRS)).
In its ruling dated 19 July 2010 (II ZB 18/09, AG 2010, pp. 629 et seq., “Stollwerck”) the Federal
Court of Justice ruled that the market price of the share used to derive a fair compensation paid
to squeeze-out minority shareholders must be measured on the average share price over a three-
month period prior to announcement of the structural measures. This approach should also be
applied to the compensation payment to be paid upon the conclusion of a corporate contract.
According to the prevailing opinion and numerous court rulings, a fair guaranteed dividend
pursuant to Sec. 304 AktG should be derived, by contrast, from the business value (OLG Munich,
11 March 2020, 31 Wx 341/17, No. 104 (BeckRS)). The average market price does not have any
relevance in this regard (see BGH, 13 February 2006, II ZR 392/03, AG 2006, pp. 331, 332; OLG
Düsseldorf, 25 May 2016, 26 W 2/15, No. 74 (BeckRS); OLG Frankfurt, 26 January 2015, 21 W 26/13,
No. 70 (juris); OLG Stuttgart, 17 October 2011, 20 W 7/11, No. 481 (juris); LG Munich I, 27
November 2019, 5 HK O 6321/14, ratio decidendi p. 275, for a contrary view: LG Frankfurt, 27 June
2019, 3-05 O 38/18, No. 87 (BeckRS)).
4.5. Comparative Valuations
In addition to discounted cash flow based valuations, business valuation practice also uses
multiples of various indicators to estimate preliminary business value, set a range of values or to
test plausibility. Like the capitalized earnings method, this valuation concept is also based on
earnings. However, the business value in this case is determined by multiplying a performance
indicator. The multiples method is based on a comparative valuation in the sense that the suitable
multiples are derived from capital market data of listed peer group companies or transactions and
then applied to the company to be valued.
- 21 -
Such multiples-based valuations only represent a simplified valuation, but in some cases they can
provide an indication of the plausibility of other methods (see IDW S1 2008, No. 143; for critical
opinions on their informative value see: OLG Frankfurt, 17 January 2017, 21 W 37/12, No. 146
(BeckRS); OLG Frankfurt 2 May 2011, 21 W 3/11, No. 83 (juris); OLG Frankfurt, 15 February 2010, 5
W 52/09; No. 105 (juris); LG Munich I, 2 December 2016, 5 HK 5781/15, No. 62 (juris)). In addition
to the analytical valuation using the capitalized earnings method, the Neutral Valuer also
conducted a comparative valuation using analyst estimates.
We assessed the calculations performed by the Neutral Valuer. In conclusion, there is no indication
that the calculated capitalized earnings value is too low in comparison to the current situation on
the capital markets.
4.6. Prior Acquisitions by ams Offer GmbH
In its ruling on 27 April 1999, the Federal Constitutional Court ruled that the price actually paid by
a majority shareholder for shares in an entity it controlled could be ignored in the valuation of
equity when calculating a fair compensation pursuant to Sec. 305 AktG because they have no
relationship to the “true” value of equity held by the minority shareholder nor to the fair market
value of the shares (see BVerfG, 27 April 1999, BvR 1613/94, AG 1999, pp. 566, 568). The
deliberations of a majority shareholder prior to taking and preparing any measure to alter the
legal structure of the entity with the concomitant willingness to pay a higher price, for example in
the context of a takeover bid, only apply to the situation of the majority shareholder and have no
relevance for third parties. From the view of the minority shareholder, the (elevated) price paid by
the majority shareholder for individual shares can only be realized if it managed to sell its shares
to the majority shareholder. However, the minority shareholder has no constitutional right to force
such a sale. This ruling agrees with the prevailing opinion in the technical literature and the rulings
from the highest court (see, for all, van Rossum, in: Münchener Kommentar zum AktG, 5th edition,
2020, § 305, No. 91, BGH, 19 July 2010, II ZB 18/09, AG 2010, pp. 629, 632).
- 22 -
The European Court of Justice came to a similar conclusion in its ruling dated 15 October 2009
((Rs. C 101/08, AG 2009, pp. 821 et seq.). In the opinion of the ECJ, European law does not contain
any legal principle which would protect minority interests to the extent that the majority
shareholder is duty-bound to buy shares at the same terms and conditions as those it accepted
when it acquired its majority holding to obtain control or reinforce its control of the entity. The
irrelevance of prices paid by the majority shareholder was once again expressly confirmed in a
ruling handed down by the Federal Court of Justice (19 July 2010, II ZR 18/09, AG 2010, pp. 629,
632), the OLG Munich (26 June 2018, 31 Wx 382/15, No. 34 (BeckRS), the OLG Düsseldorf (22
March 2018, 26 W 20/14, No. 58 (BeckRS); 12 November 2015, 26 W 9/14, No. 43 (BeckRS), the
OLG Stuttgart (4 May 2011, 20 W 11/08, AG 2011, pp. 560, 562), the OLG Frankfurt (24 November
2011, 21 W 7/11, No. 30 (juris)), as well as the OLG Hamburg (8 October 2018, 13 W 20/16, No. 30
(BeckRS); (27 March 2012, 13 W 20/09, ratio decidendi, p. 7), (for a similar view see also LG Munich
I, 21 June 2013, 5 HK O 19183/09, Nos. 322 with further references (juris).) The most important
point in this regard being that the prices were not fair market values. On the other hand, the LG
Frankfurt (22 September 2015, 3-5 O 63/14, ratio decidendi p. 33; LG Frankfurt, 25 November 2014,
3-5 O 43/13, No. 86 (juris)) does assign a certain relevance to the pre-acquisition prices paid
(supported by: LG Hanover, 22 August 2012, 23 AktE 149/10 in opposition to the ruling of the
Federal Court of Justice).
4.7. Method Used to Calculate the Fair Compensation
According to Sec. 305 AktG, a domination and profit and loss transfer agreement must place an
obligation on the other party to acquire upon request the shares of minority shareholders upon
payment of a fair compensation stipulated in the agreement.
Pursuant to Sec. 305 (3) sentence 2 AktG, the fair compensation must reflect the circumstances of
the company at the time when the shareholders’ meeting passes the resolution on the transfer of
the shares. A compensation is fair when it represents the full, actual value of the share in the
company. The departing shareholder should receive the value of his participation in the inherent
value of the company in operation in its entirety (BVerG dated 7 August 1962, 1 BvL 16/60 and
BVerfG dated 27 April 1999, 1 BvR 1613/94).
In this case, the defined compensation is based on the business value derived from its capitalized
earnings value taking into account the non-operating assets.
- 23 -
4.8. Method Used to Calculate the Guaranteed Dividend
In terms of the amount of the guaranteed dividend, Sec. 304 (2) sentence 1 AktG states that the
guaranteed payment must at least ensure an annual payment that is commensurate to the
prospective average share in profits allocable to the individual share on the basis of past earnings
and its future earnings prospects, after taking account of appropriate depreciation, amortization
and impairments but disregarding the creation of other revenue reserves. The minority
shareholders should therefore be fundamentally entitled to a share of average future profits that
they could otherwise expect if the profit and loss transfer agreement had not been concluded.
The sustainable amount that the company can distribute is therefore what is decisive.
Based on the prevailing opinion in the profession, the average return allocable to a shareholder
under the terms of the law is derived from expressing the business value as an annuity. In light of
the fact that corporate agreements are generally for an indefinite term, this arithmetical
relationship can be represented by translating the general calculation of the business value into a
terminal value calculation.
𝑉 =𝐷
𝑖𝑏𝑧𝑤. 𝐷 = 𝑉 ∗ 𝑖
The formula used to calculate the guaranteed dividend (D) has been correctly translated into a
perpetual annuity by multiplying the business value (V) with the interest rate (i) of the annuity.
4.9. Conclusion
In sum, we believe that use of the capitalized earnings method to value the company concerned
and to derive the fair compensation and the guaranteed dividend is a fair approach in terms of
Sec. 293e (1) sentence 3 No. 2 AktG.
On the basis of our audit, no other method should have been applied and was not in fact used.
There is no need to report on weighting the various methods pursuant to Sec. 293e (1) sentence
3 No. 3 AktG, due to the sole use of the capitalized earnings value (taking into account the value
of non-operating assets) to determine the fair compensation and the guaranteed dividend.
- 24 -
5. Methods Used to Audit the Fairness of the Guaranteed
Dividend and the Fair Compensation
The business valuation is based on the planning calculations of OSRAM AG for fiscal years 2020
to 2025. In the course of our audit we examined the business planning to assess its consistency
and review the plausibility of the assumptions made (see IDW AcPS 2/2017, No. 5). In the course
of our audit procedures we relied on analyses of historical figures, management explanations of
the business planning, working papers of the Neutral Valuer and market and competitor
information available in the public domain. The persons named to us as contacts at OSRAM AG
explained to us in detail the business activities and the basis of the business plans. Moreover, we
determined various indicators and growth rates and compared these to the available market
information to verify the plausibility of the planning. For details, we refer to our comments on the
planning hereafter.
For the purpose of analyzing the past performance of the company, we were provided with the
audit reports for the financial statements and the audit report for the consolidated financial
statements for the fiscal years 2017 to 2019 of OSRAM AG. Key influencing factors were explained
to us by the respondents in discussions.
We used the valuation model of the Neutral Valuer which was provided to us in electronic form
and the valuation report to audit the business valuation. Responses to individual questions were
provided to us orally or in writing. While assessing the methods used in the business valuation,
we examined whether the principles of IDW S1 2008 were observed. We audited the discount rate
using the working papers of the Neutral Valuer and capital market data that is available in the
public domain. We examined whether non-essential operating assets needed to be recognized
separately based on the audit reports on the financial statements and interviews with the
respondents named to us.
We set the following audit focus when auditing the calculation of the capitalized earnings value
or the fair compensation and the guaranteed dividend:
1. Analysis of the adjustments performed within the context of analyzing historical data
2. Plausibility and timeliness of the business planning
3. Identification and consideration of synergy potentials
4. Correct application of IDW S1 2008
5. Derivation of sustainable earnings and and the sustainable retention
6. Compilation of the peer group and determination of the beta factor
- 25 -
7. Relevance of the market share price in deriving the fair compensation
8. Calculation of the guaranteed dividend
The differences in opinion between Ebner Stolz and the Neutral Valuer, PwC, on certain points
were discussed in the course of the audit.
In connection with the derivation of the beta factor, different delimitations of the peer group
companies, the stock indexes used and the consideration of capital structure risks were discussed
intensively with the Neutral Valuer.
By the time the valuation work was completed there were no longer any differences in opinion
between Ebner Stolz and PwC that had any effect on our assessment of the fairness.
Correspondingly, our audit report is not qualified in any regard and confirms in full the
appropriateness of the fair compensation and the guaranteed dividend.
- 26 -
6. Audit Findings in Detail
The generally accepted standards for the valuation of business enterprises explained in Section 4
represent abstract parameters which require specification. We verified to our satisfaction that the
general principles for the performance of business valuations have been appropriately applied in
the specific methods used to value OSRAM AG, as explained below.
The business value of OSRAM AG was derived by the Neutral Valuer from the capitalized earnings
value based on the operating business of the company. Based on our findings, this specific
method is appropriate for the purpose and fairly reflects the business value of OSRAM AG within
a valuation model.
We verified every material step of the valuation, particularly with regard to the derivation of
distributable financial surpluses, the determination of the discount rate and the discounting of
the financial surpluses to the valuation date.
6.1. Valuation Object
OSRAM AG is a global player organized as a German stock corporation with its registered offices
in Munich. The Company is entered in Department B of the Commercial Register of the local court
of Munich under the number HRB 199675. According to its articles of association, the Company’s
business objective is to manage other companies, particularly those active in the following fields:
1. Development, engineering design, production and distribution of electronic components,
electronic systems, software, lighting, illumination and photonic products, including photonic
converters, systems and solutions, including lightbulbs, lamps, operating and manufacturing
equipment and machines, controls, semi-finished products, parts and accessories for such
products, systems and solutions as well as products, systems and solutions in neighboring or
related fields.
2. Development, engineering design, production and distribution of components and systems
for automobiles of all kinds.
3. Consulting, service and aftersales service in the above fields.
The fiscal year of OSRAM Licht AG begins on 1 October and ends on 30 September of each
subsequent year. Its share capital as at 23 September 2020 amounts to EUR 96,848,074. Share
capital consists of 96,848,074 no-par value registered shares with an imputed value of EUR 1.00
each.
- 27 -
The managing board of the Company is authorized to repurchase shares and to sell any
repurchased shares in the cases stipulated in Sec. 71 AktG. According to the annual report for
2019, the managing board was authorized on 14 February 2017 to repurchase shares within a
period expiring on 13 February 2022 of a volume equal to 10% of share capital as at the date of
the authorization of EUR 104,689,400 at the time, or, if lower, the share capital on the date on
which the authorization is exercised. As at the valuation date, OSRAM AG holds 2,664,388 own
shares.
Directly and indirectly held subsidiaries over which OSRAM AG exercises control are consolidated
in the Group’s consolidated financial statements. In this regard, OSRAM holds direct investments
in two entities:
Figure 1: Annual Report 2019, OSRAM AG; Audit Report 2019, OSRAM GmbH Munich, our own
presentation.
The business being valued (“valuation object”) is accurately presented in the report on the
corporate agreement. The valuation object is OSRAM AG and all its equity investments in Germany
and abroad (hereinafter also referred to as the “OSRAM Group”). The OSRAM Group develops,
produces and distributes products and solutions for the visible and invisible light spectrums that
are primarily used in mobility, networking, healthcare and wellness as well as safety and security
applications. Generally, the Group is organized into three business units: Opto Semiconductor
(“OS”), Automotive (“AM“) and Digital (“DI“).
The OSRAM Group operates globally and distributes its products in over 120 countries. The Group
has 26 international and national production locations.
OSRAM AG
OSRAM Beteiligungen GmbH,
MunichOSRAM GmbH, Munich
100% 39.7%
60.3%
- 28 -
The sale of the lighting (“luminaires”) business on 1 October 2019 constituted a material corporate
transaction that changed the structure of the OSRAM Group. The Lighting Solutions division,
which was previously a part of the Lighting Solutions & Systems (“LSS”) business unit was almost
completely dissolved. Essentially this concerned the entity Siteco Beleuchtungstechnik GmbH,
Traunreut (“Siteco“). From that point on, as presented in the annual report, the assets and liabilities
of LSS, Siteco and the remaining European luminaires business were recognized as “Assets held
for sale” and as “Liabilities associated with assets held for sale” pursuant to IFRS 5 in the
consolidated balance sheet and classified as “Discontinued operations” pursuant to IFRS 5 in the
consolidated income statement and consolidated cash flow statement.
The majority of the Group’s revenue is generated in the automotive, mobile devices and general
lighting markets. The geographical segment reporting is divided into the EMEA region (Europe,
Middle East, Russia and Africa), the APAC region (Asia, Australia and Pacific) and the Americas
region (USA, Canada, Mexico and South America). Within the EMEA, APAC and Americas regions,
Germany, China and the USA are the countries with the greatest share of sales.
The OS business unit offers a wide range of LEDs in the visible and infrared spectrums and Low-
Power, Mid-Power, High-Power und Ultra-High-Power categories for general illumination,
automotive, consumer goods and industrial applications as well as laser diodes and optical
sensors. The most important markets for its components are the automotive sector, smartphones
and wearables, general illumination, horticulture and industrial markets. As at 30 September 2019,
approximately 11.4 thousand staff were employed in the OS business unit.
The AM business unit focuses on the development, production and distribution of lamps, light
modules and sensors, which it sells to original equipment manufacturers and their suppliers in the
automotive industry and to the spare parts market (aftermarket). The product portfolio includes
products based on traditional lighting technologies as well as LED-based solutions. The AM
business unit currently also includes the subsidiary OSRAM CONTINENTAL, which operates the
automotive system (or module) original equipment manufacturer business based on LED and laser
technology. There are plans to discontinue OSRAM Contintental by the end of fiscal year 2021.
The joint venture partners, OSRAM and Continental, will take back the assets, customer projects
and related employees they each contributed to the venture. Until the beginning of the 2019 fiscal
year, the AM business unit, together with other divisions, constituted the Specialty Lighting
segment. These other divisions were transferred to the new DI business unit in the course of the
restructuring.
- 29 -
The DI business unit was established at the beginning of the 2019 fiscal year. The DI business unit
combines all of the business activities that will benefit the most from the growing use of digital
technologies. These businesses can be summarized as follows:
▪ The business of the former Digital Systems business unit in traditional electronic ballasts and
LED drivers, LED modules, light engines and light management systems (including
sensorbased and softwarebased valueadded services).
▪ The business of the former Specialty Lighting business unit especially in specialty lamps and
lighting systems for stages, cinemas, and studios. In addition, it includes LED based plant
cultivation systems in the area of smart farming, as well as lighting solutions for medical and
industrial applications, such as highintensity UV lamps and textile illumination.
▪ OSRAM’s remaining business of the former Lighting Solutions business unit. This comprises
connected lighting solutions for architectural, interior and exterior lighting (Traxon).
As at 30 September 2019 the DI business unit employed around 4,475 staff.
In addition to the three business units, there are additional units at corporate level. In this regard,
the much smaller business unit, Fluxunit, is to be mentioned. This unit focuses on venture capital
investments. Fluxunit makes targeted investments in young startups with innovative business
models and technologies that will be a good fit to the future business of the OSRAM Group in the
long term. In fiscal year 2019 the investment portfolio of the venture capital unit consisted of
eight companies and two venture capital funds. One of the more recent additions to the portfolio
is the start-up Recogni, Inc., Cupertino, USA (“Recogni“), which focuses on artificial intelligence
systems for self-driving cars.
- 30 -
The following chart presents the organizational structure of OSRAM AG as well as the distribution
of its revenue and EBITDA for fiscal year 2019 among the various business units:
Source: The OSRAM Group, internal presentation, revenue includes intercompany sales.
External revenue of EUR 3,464 million in the year 2019 (2018: EUR 3,789 million) breaks down into
EUR 1,776 million for the AM business unit (2018: EUR 1,920 million), EUR 916 million for the
DI business unit (2018: EUR 914 million), EUR 701 million for the OS business unit (2018:
EUR 861 million) and EUR 70 million for corporate items (2018: EUR 93 million).
Automotive
Revenue: EUR 1,776 Mio.
EBITDA: EUR 117 Mio.
(FY 2019)
Digital
Revenue: EUR 916 Mio.
EBITDA: EUR -39 Mio.
(FY 2019)
Shareholders
OSRAM AG
Opto Semiconductors
Revenue: EUR 1,453 Mio.
EBITDA: EUR 202 Mio.
(FY 2019)
- 31 -
Source: OSRAM, Annual Report 2019; own presentation.
In terms of the geographical regions, approximately 34% of revenue was generated in EMEA, 36%
in APAC and 30% in the Americas in fiscal year 2019.
Based on market segment, in fiscal year 2019 roughly 55% of revenue was generated in the
Automotive Lighting segment, around 20% in the General Lighting segment and 5% each in the
segments of Mobile & Electronics, Entertainment and Horticulture. The remaining 10% of revenue
was generated in other markets.
Basically, a number of methods can be considered for valuing a group of companies like OSRAM
Group. Using the sum of the parts approach, each group company is valued separately, and in
isolation, with the value of the group being determined by addition of the individual values.
Alternatively, the value of the group can be derived directly on the basis of aggregating
consolidated earnings. The third approach is the flow of dividends model, by which the anticipated
investment income is modeled as dividends to be received by the parent company, in this case
OSRAM AG (see OLG Frankfurt, 5 December 2013, 21 W 36/12, No. 53 (juris); OLG Stuttgart, 15
October 2013, 20 W 3/13, No. 101 (juris); for general remarks on the three approaches: Wollny,
DStR 2014, pp. 2089, 2091).
In this case, the Neutral Valuer correctly derived the business value from the consolidated business
planning.
20.3%
51.3%
26.4%
2.0%
External Sales per Business Unit
(FY 2019)
Opto Semiconductor
Automotive
Digital
Reconciliation to consolidated financial statements
18.1%
16.0%
13.6%21.9%
7.2%
23.2%
Revenue per region
(FY 2019)
EMEA (without Germany)
Germany
APAC (without China)
China
Americas (without USA)
USA
- 32 -
To review the completeness of the valuation object, we referred to the list of shareholdings of the
OSRAM Group and analyzed whether the expected value contributions of the individual group
companies and equity investments are either integrated in the Group’s consolidated planning or
considered as separately-valued assets by the Neutral Valuer. Based on our findings the valuation
object was fully considered in the business valuation performed by PwC.
6.2. Valuation Date
The valuation date for the fair compensation was set at 3 November 2020. Pursuant to Sec. 305
(3) sentence 2 AktG, this treatment is correct because this is the day on which the extraordinary
general shareholders’ meeting of OSRAM AG will pass a resolution on the Domination and Profit
and Loss Transfer Agreement.
The Neutral Valuer set the technical valuation date at 30 September 2019 and then geometrically
discounted the future distributable surpluses to this date. The capitalized earnings value
determined on 30 September 2019 was then compounded to 3 November 2020. We verified the
arithmetic accuracy of the compounding.
The calculation of the guaranteed dividend is derived from the equity value at the beginning of
the fiscal year in which the Domination and Profit and Loss Transfer Agreement becomes effective,
or is scheduled to take effect (see WPH Edition: Bewertung und Transaktionsberatung, 2018 Chap.
C No. 82; Popp, WPg 2008, p. 29; OLG Munich, 11 March 2020, 31 Wx 341/17, No. 102 (BeckRS)
in conjunction with LG Munich I, 28 April 2017, 5 HJ IO 4736/11, ratio decidendi p. 126; OLG
Düsseldorf, 29 October 2018, 26 W 13/17, No. 8 (BeckRS); OLG Frankfurt, 26 January 2015, 21 W
26/13, No. 71 (juris)). The Neutral Valuer appropriately calculated the guaranteed dividend on the
basis of the business value determined using the capitalized earnings method as of 30 September
2020.
- 33 -
6.3. Capitalized Earnings Value
a) Analysis of Historical Results
In order to assess the existing profitability of the Group and the plausibility of the business
planning, the Neutral Valuer analyzed the historical results based on the financial reporting of
OSRAM AG for the fiscal years 2017 to 2019, breaking down income and expenses, eliminating
extraordinary items and explaining them, in order to reveal the effective profit drivers in the past.
Moreover, the year-to-date figures for the third quarter were also analyzed on the basis of the
interim reporting for the period between 1 October 2019 and 30 June 2020 of the current fiscal
year.
To audit this analysis of the historical results we were provided with the audited consolidated
financial statements of OSRAM AG for fiscal years 2017 to 2019. In addition, we considered
analyses prepared for internal purposes and the interim reports of OSRAM AG. On this basis we
tested the plausibility of the analyses conducted by the Neutral Valuer.
- 34 -
The following summary presents the unadjusted financial performance of the OSRAM Group for
the fiscal years 2017 to 2019 as well as the third quarter of 2020:
Consolidated Statement of Income, unadjusted
FY17 FY18 FY19 Q1-Q3 20 FY17-19
FY as of 30.09 Actual Actual Actual Actual CAGR
mEUR mEUR mEUR mEUR in %
Revenue 4,128 3,789 3,464 2,300 -8.4%
Cost of goods sold 2,692 2,555 2,578 1,734 -2.1%
Gross profit 1,436 1,234 886 566 -21.5%
Research and development costs 364 400 418 300 7.1%
Marketing, selling and general admin. expenses 697 584 612 480 -6.3%
Other operating income 30 37 33 40 5.4%
Other operating expenses 7 16 234 3 480.4%
EBIT 397 271 -345 -176 n/a
Depreciation and amortization 224 251 521 308 52.5%
EBITDA 621 522 176 132 -46.7%
Financial result -8 -9 -32 -27
EBT 389 263 -377 -203
Income taxes -114 -74 33 25
Income (loss) OSRAM (continuing operations) 275 188 -343 -178
Income (loss) from discontinued operations, net of
tax -51 -48 -123 -7
Net income (loss) 224 141 -467 -185
Capital expenditure 537 455 208 67
Capital expenditure in % of revenue 13.0% 12.0% 6.0% 2.9%
Annual change in revenue in % n/a -8.2% -8.6% n/a
in % of revenue
Gross profit 34.8% 32.6% 25.6% 24.6%
Research and development costs 8.8% 10.6% 12.1% 13.0%
Marketing, selling and general admin. expenses 16.9% 15.4% 17.7% 20.9%
Other operating income 0.7% 1.0% 1.0% 1.7%
Other operating expenses 0.2% 0.4% 6.8% 0.1%
EBIT-Margin 9.6% 7.2% -10.0% -7.7%
EBITDA-Margin 15.1% 13.8% 5.1% 5.7%
- 35 -
The business units of the OSRAM Group were reorganized at the beginning of fiscal year 2019.
Before the reorganization, the business was mainly conducted by the OS, Specialty Lighting and
Lighting Solutions & Systems business units. The OS business unit remained after the
reorganization. The Specialty Lighting business unit was allocated to the new business units AM
and DI in the course of the reorganization. The former Lighting Solutions & Systems business unit
was dissolved in the course of the reorganization and reported as discontinued operations, with
the exception of the Digital Systems, Digital Lumens und Traxon divisions, which were allocated
to the DI business unit.
In light of the fact that there is no comparative earnings statement for fiscal year 2017, comparison
between the fiscal years 2017, 2018 and 2019 is limited. As a result, the Neutral Valuer focused on
the developments in fiscal years 2018, 2019 and the first three quarters of 2020 when eliminating
extraordinary items and normalizing earnings. In addition to adjusting the financial performance
to eliminate non-recurring items, the most significant adjustments involved considering the
financial performance in light of the organizational changes and any changes made due to
changes in accounting standards.
The following summary presents a breakdown of revenue to the (new) business units and
corporate items as well as a summary of the consolidation effects in the fiscal years 2018, 2019
and the first three quarters of 2020.
Pages 65 et seq. of the valuation report from PwC contain explanations of the adjustments
performed at corporate level. In terms of content, the eliminations relate to items that were
unique, non-recurring or not matched to the period. Above the level of EBITDA the adjustments
mostly consist of transformation costs, acquisition-related costs and other costs. Transformation
costs represent costs of the measures taken to adjust organizational structures. This includes such
items as severance payments to personnel in the wake of the necessary adjustment of capacities
and restructuring expenses undertaken to reduce the cost base. Acquisition-related costs
generally consist of consulting fees, integration costs and contingent consideration related to the
acquisition or divestment of companies and equity investments.
Revenues per Business Units
FY18 FY19 Q1-Q3 20 FY18 FY19
FY as of 30.09 Actual Actual Actual
mEUR mEUR mEUR in % in %
Opto Semiconductors 1,725 1,453 1,018 2.4% -15.8%
Automotive 1,920 1,776 1,193 n/a -7.5%
Digital 914 916 576 n/a 0.2%
Reconciliation to cons. fin. statements -770 -681 -487 n/a -11.6%
Total Revenue 3,789 3,464 2,300 -8.2% -8.6%
Change
- 36 -
When making the eliminations, the Neutral Valuer followed the approach used by the Company
for its external reporting and treated the expenses mentioned above as special items. In this
regard, the Neutral Valuer points out that additional significant transformation costs can be
expected in the planning periods, quite independently from the above approach.
In addition to the adjustments made by the Company itself, the Neutral Valuer has eliminated
income from the sale of a business division and real estate sold in 2018 as well as the costs of
establishing a provision for the costs of litigation in the year 2019. Loss allowances recorded on
trade receivables and inventories were eliminated from the first three quarters of the fiscal year
2020.
To arrive at adjusted EBIT, the Neutral Valuer analyzed depreciation, amortization and
impairments in addition to the adjustments made to EBITDA, and eliminated any extraordinary
write-downs it identified. These impairment losses relate to the goodwill carried in OSRAM
Continental in the year 2019 and the first three quarters of the current fiscal year 2020 as well as
in Digital Systems in the year 2019. In addition, two impairment losses recorded on property, plant
and equipment in the fiscal years 2018 and 2019 were eliminated.
Due to the first-time application of the new IFRS 16 standard in fiscal year 2020 the Neutral Valuer,
PwC, adjusted historical financial performance to make the historical figures for fiscal years 2018,
2019 and Q1 to Q3 2020 comparable (referred to by PwC as “pro forma adjustments”).
- 37 -
The adjustments performed by PwC and the adjusted consolidated income statement can be
summarized as follows:
Consolidated Statement of Income, adjusted
FY18 FY19 Q1-Q3 20
FY as of 30.09 Actual Actual Actual
mEUR mEUR mEUR
Revenue 3,789 3,464 2,300
Normalization EBITDA
EBITDA before adjustments 522 176 132
Transformation costs 79 87 48
Acquisition-related costs 18 41 2
Other 2 3 0
Total Special Items 100 131 50
Adjusted EBITDA I 622 307 182
Further Normalization EBITDA
Legal dispute Lighting Science Group Corp. n/a 7 n/a
Receivable write-off Fluence Bioeng. n/a n/a 5
Inventory write-off Business Unit DI n/a n/a 5
Income from sale of real estate assets 5 n/a n/a
Income from sale of Process Heat Business 15 n/a n/a
Pro-forma Adjustments EBITDA
Adjustments Leasing IFRS 16 57 58 n/a
Adjusted EBITDA II 659 372 192
Depreciation and amortization before adjustments 251 521 308
Normalization EBIT
EBIT before adjustments 271 -345 -176
Normalization EBITDA 137 196 60
Adjusted EBIT I 408 -149 -116
Further Normalization EBIT
Goodwill impairment Digital Systems n/a 39 n/a
Goodwill impairment OSRAM Continental n/a 171 48
Impairment OLED 5 n/a n/a
Impairment FEP n/a 5 n/a
Pro-forma Adjustments EBIT
Adjustments Leasing IFRS 16 -49 -50 n/a
Adjusted EBIT II 364 16 -68
Margin in % of revenue
EBIT-Margin 7.2% -10.0% -7.7%
Adj. EBIT-Margin I 10.8% -4.3% -5.0%
Adj. EBIT-Margin II 9.6% 0.5% -3.0%
EBITDA-Margin 13.8% 5.1% 5.7%
Adj. EBITDA-Margin I 16.4% 8.9% 7.9%
Adj. EBITDA-Margin II 17.4% 10.7% 8.4%
- 38 -
Within the course of our audit, we reconciled the historical results with the corresponding
consolidated and quarterly financial statements. In addition, we checked the eliminations and
adjustments made by the Neutral Valuer. In our opinion the eliminations, adjustments and
comments made by the Neutral Valuer relating to the financial performance are appropriate.
b) Operating Planning
Planning process
The consolidated planning of the Group covers five years from 2020 to 2025. The consolidated
business planning has been prepared in accordance with International Financial Reporting
Standards (IFRS) corresponding to the consolidated financial statements of OSRAM AG.
The corporate planning of the OSRAM Group uses the top-down, bottom-up mixed planning
approach.
The planning process used to prepare the business planning generally underlying the business
valuation commenced in April 2020 and was completed in June 2020. The planning projections
for the fiscal years 2020 and 2021 are on a quarterly basis and on an annual basis for the ensuing
years. In the meantime, a new strategy has been formulated with regard to joint venture, OSRAM
Continental. It is assumed on this basis that the joint venture will be dissolved. The assets
contributed by OSRAM and Continental will be transferred back to the respective partner by the
end of fiscal year 2021. The planning statements were revised at the beginning of September 2020
to take account of this circumstance. For the fiscal year 2020, the current forecast dated 16
September 2020 is used.
The business planning is based on the planning statements of each business unit and the
individual segments of each business unit. The central planning assumptions were initially set by
corporate management and provided to the officers in charge of budgeting in a planning letter.
In addition the officers in charge of the planning were also provided with guidelines on
macroeconomic developments from the corporate strategy department on account of the special
circumstances created by the corona pandemic. In addition to information on the anticipated
trends in GDP, this letter also includes disclosures on the expected trends in automobile
production. Moreover, the corporate strategy department of OSRAM provides projected market
sizes for the markets that are relevant to the Group which it has derived from internal market
models and forecasts.
- 39 -
Due to the great relevance of the automotive and automotive lighting market, the Neutral Valuer
has described in detail how the corporate strategy department of the OSRAM Group derived the
market model for the automotive lighting market. The relevant market size for the planning period
is derived in four steps. With the aid of data from IHS Markit, an information services provider, an
initial forecast of the anticipated volume of automobile production is made at the level of the
automobile manufacturers' series. Thereafter the penetration rates are determined by referring to
the individual technologies used in the various models of automobiles using data from IHS Markit
and the number of lights per vehicle is forecasted in cooperation with the sales departments of
the business units. In a final step, the customary average sales prices per lighting source are
analyzed to arrive at an indicator of market size for the planning period. A similar logic is used to
forecast the other markets of relevance to the OSRAM Group.
Budgets are then drawn up for the individual segments of the business units that take account of
the top-down targets. The officers in charge of the planning consider the planning for both the
production facilities and sales and distribution. At the OS business unit sales are planned using a
bottom-up approach at the level of each application. Thereafter the imputed market share is
validated to ensure that this meets the expectations of the officers in charge of the planning. The
AM business unit prepares its planning mainly on the basis of the automotive market model
explained above and supplements this with internal analyses. The DI business unit draws up a
SWOT analysis for each segment that considers the internal strengths and weaknesses and the
external market trends and competitive developments. After taking account of price and volume
trends and any changes to the portfolio, the revenues of the AM and DI segments are then
projected.
The planning projections of expenses within the planning period are performed at the level of the
business units and mostly also on level of their segments. The cost of sales is projected after taking
account of productivity gains in order to cushion the customary erosion of prices on the
semiconductor market.
Finally, the planned revenue and expenses are aggregated at the level of the business units and
approved by the head of the business unit. The plausibility of the forecasts drawn up by the
business units is then checked against external sources. The planning statements of the individual
business units are then supplemented by the costs of corporate functions at group level with any
intercompany revenue being eliminated in the consolidation. The managing board only suggests
amendments in isolated cases with the planning being returned to the business units for revision.
The planning statements were ratified by the managing board on 7 September 2020. The
supervisory board acknowledged the planning on 7 September 2020.
- 40 -
We had the officers in charge of the planning process explain the planning process to us in the
course of our audit procedures whereupon we verified it using our own procedures. We
particularly focused on the planning approach and methodology used to model the automotive
market. In conclusion, we are of the opinion that the planning process provides a suitable planning
foundation for the purposes of a business valuation.
Budget comparisons
To assess the reliability of the planning process, the Neutral Valuer compared the revenue and
the adjusted and unadjusted EBITDA projected in the budget of the corresponding prior year
against the actual revenue and adjusted and unadjusted EBITDA recorded for the years 2017 to
2019 (analysis of budget deviations).
The following summary presents the budget deviations identified by the Neutral Value for the
three fiscal years analyzed at the level of revenue, adjusted EBITDA and unadjusted EBITDA.2
In fiscal year 2017 the budgeted revenue target was surpassed, while in fiscal years 2018 and 2019
the budgeted revenue target was missed by a wide margin, -5.1% and -14.5% respectively. With
regard to EBITDA, there was a positive deviation to the budget target of 6.3% in 2017. In the years
2018 and 2019, by contrast, the target was missed significantly by -23.8% and -66.2% respectively.
Also, at the level of adjusted EBITDA I on which special items, such as transformation costs and
acquisition-related transaction costs, were eliminated the budget target was missed by a wide
margin in fiscal years 2018 and 2019.
In the year 2019, the budget deviations were primarily due to the AM and OS business units, which
were largely influenced by the low volume of automobile production. The main reasons for the
failure to meet the budget targets in the DI business unit lie in a delay in opening a new production
plant, scarcity in sourcing components and a fall in revenue associated with the city beautification
projects in China. At the level of EBITDA I the failure to meet the budget lies primarily in the
development of revenue and the associated negative effects.
2 The green light stands for a positive budget deviation and the red light for a negative budget deviation.
Budget Deviations FY17 FY18 FY19
Revenue 1.7% -5.1% -14.5%
Adj. EBITDA I 3.7% -13.6% -48.0%
EBITDA 6.3% -23.8% -66.2%
Plan
- 41 -
In particular, the Neutral Valuer states that revenue and EBITDA displayed good planning reliability
in 2017, which was an economically stable year. Deviations in revenue and EBITDA in the fiscal
years 2018 and 2019, by contrast, indicate that the planning was ambitious in economically
challenging times. In this regard, the budget deviations in earnings can be mostly attributed to
the budget deviations at the level of gross profit.
In the course of our audit procedures we verified the calculations and explanations provided by
the Neutral Valuer. In conclusion, we agree with the assessment made by the Neutral Valuer that
the planning statements are ambitious.
To allow us to present budget deviations for a longer planning period and not just a very short
planning horizon, the Company provided us with a comparison of the historical mid-range
planning statements of the OS business unit with the actual figures of the business unit after
eliminating special items.
The following summaries compare the projected revenue, adjusted EBITDA and adjusted EBITDA
margin listed in the business plans of the OS business unit issued in the years 2016 and 2017 for
the following years. The respective deviations are presented in the lower section as “Delta”. With
regard to the business plan of the OS business unit drawn up in the year 2016, for example, there
was a positive planning deviation of revenues in the first year of the planning (2017), with the
planning targets being missed by a wide margin in the subsequent two years of the planning. The
same picture applies to adjusted EBITDA and the adjusted EBITDA margin, but more pronounced.
Thus, the original planning target for EBITDA in 2018 was missed by -15% and the planned EBITDA
margin by -2.7 percentage points (“pp”). For the year 2019, the planned adjusted EBITDA was
missed by -57.4% and the planned adjusted EBITDA margin by -9.6 pp.
MTP MTP MTP
2017 2018 2019
Revenue 1,584 1,825 2,211
Adj. EBITDA I 434 492 596
Adj. EBITDA I-Margin 27.4% 27.0% 27.0%
Revenue 1,685 1,725 1,464
Adj. EBITDA I 473 418 254
Adj. EBITDA I-Margin 28.1% 24.2% 17.3%
Revenue 101 -100 -747
Deviation in % 6.4% -5.5% -33.8%
Adj. EBITDA I 39 -74 -342
Deviation in % 9.0% -15.0% -57.4%
Adj. EBITDA I-Margin 0.7 pp -2.7 pp -9.6 pp
Business Unit OS Business Plan 2016
Plan
Actual
Delta
- 42 -
An analysis of these planning deviations for the OS business unit confirms the assessment that
the planning is ambitious.
MTP MTP
2018 2019
Revenue 1,896 2,221
Adj. EBITDA I 515 607
Adj. EBITDA I-Margin 27.2% 27.3%
Revenue 1,725 1,464
Adj. EBITDA I 418 254
Adj. EBITDA I-Margin 24.2% 17.3%
Revenue -171 -757
Deviation in % -9.0% -34.1%
Adj. EBITDA I -97 -353
Deviation in % -18.8% -58.2%
Adj. EBITDA I-Margin -2.9 pp -10.0 pp
Plan
Actual
Delta
Business Unit OS Business Plan 2017
- 43 -
Testing the general plausibility of the business planning
The following summary presents the revenue and earnings projections of the OSRAM Group from
the fiscal year 2019 (actual) through to the years 2020 to 2025 (planned). As the OSRAM Group
has normalized its planning figures by cost category and not by function, the normalizations for
the actual figures in 2019 were not allocated to the corresponding expense items. For the fiscal
year 2019 presented here, it should be noted that according to the explanations of the Neutral
Valuer the shown expenses in some cases slightly differ from those presented in the analysis of
the historical results.
Planning Statements Group Level
FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY19-25
FY as of 30.09 Actual Plan Plan Plan Plan Plan Plan CAGR
mEUR mEUR mEUR mEUR mEUR mEUR mEUR in %
Revenue 3,464 3,020 3,198 3,526 3,857 4,209 4,559 4.7%
Cost of goods sold 2,578 2,330 2,313 2,465 2,609 2,821 2,982 2.5%
Gross profit 886 690 885 1,061 1,248 1,389 1,577 10.1%
Research and development costs 403 385 354 311 326 341 363 -1.7%
Marketing, selling & gen. admin. exp. 626 622 618 585 586 600 622 -0.1%
Other operating income 33 66 27 - - - - -100.0%
Other operating expenses 234 3 20 - - - - -100.0%
EBIT -345 -254 -80 165 336 448 591 n/a
Depreciation and amortization 521 397 331 315 310 305 312
EBITDA 176 143 250 480 646 753 903
Capital expenditure 208 99 219 238 271 304 307
Capital expenditure in % of revenue 6.0% 3.3% 6.8% 6.8% 7.0% 7.2% 6.7%
Annual change in revenue in % n/a -12.8% 5.9% 10.3% 9.4% 9.1% 8.3%
in % of revenue
Gross profit 25.6% 22.9% 27.7% 30.1% 32.4% 33.0% 34.6%
Research and development costs 11.6% 12.8% 11.1% 8.8% 8.4% 8.1% 8.0%
Marketing, selling & gen. admin. exp. 18.1% 20.6% 19.3% 16.6% 15.2% 14.2% 13.7%
Other operating income 1.0% 2.2% 0.8% 0.0% 0.0% 0.0% 0.0%
Other operating expenses 6.8% 0.1% 0.6% 0.0% 0.0% 0.0% 0.0%
EBIT-Margin -10.0% -8.4% -2.5% 4.7% 8.7% 10.6% 13.0%
Depreciation and amortization 15.0% 13.2% 10.3% 8.9% 8.0% 7.3% 6.8%
EBITDA-Margin 5.1% 4.7% 7.8% 13.6% 16.7% 17.9% 19.8%
- 44 -
Starting from 2019, the Company is planning rapid compound annual growth in revenues of
around 4.7% for the years 2019 to 2025. In the year 2020, revenue is anticipated to slump by -
12.8%. This decrease is mainly attributable to the effects of the corona pandemic and the trends
in the automotive sector. According to the expectations of the managing board, the effects of the
crisis should peak in the third quarter of 2020. In addition, it is expected that a comparable level
of activity will be reached in Q3 2021 as that seen before the outbreak of the corona pandemic.
Consequently, revenue is projected to increase by 5.9% in fiscal year 2021. Based on the trends in
the preceding quarters, projected revenue for 2021 remains under the level seen in 2019.
The following summary presents the planned development of revenue at the level of the business
units starting from the actual figures for 2019. It should be noted at this point that the following
presentation of the fiscal year 2019 has been adjusted to the new organizational structure of the
fiscal year 2020.
The planning of the OS business unit is based on a bottom-up approach in which the competitive
environment, orders on the books and potential orders in the pipeline are considered after
discussing them with the individual segments and the sales department. A distinction is made in
the OS business unit between the segments of Sensing, Visualization & Laser, Illumination and
Automotive. Due to its business model an annual price erosion of a high single-digit percentage
is expected by the OS business unit, which is to be more than compensated by higher volumes in
the mid to long term. In this context, the OS business unit projects compound annual growth of
8.4% between 2019 and 2025. Based on the revenue of EUR 1,464 million in the year 2019, the
revenue of the OS business unit is projected to rise by roughly EUR 911 million or 62.2% to EUR
2,375 million in the year 2025.
Revenues Business Units
FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY19-25
FY as of 30.09 Actual Plan Plan Plan Plan Plan Plan CAGR
mEUR mEUR mEUR mEUR mEUR mEUR mEUR in %
Opto Semiconductors 1,464 1,336 1,425 1,604 1,841 2,102 2,375 8.4%
Automotive 1,781 1,573 1,717 1,787 1,897 1,971 2,021 2.1%
Digital 934 741 811 874 930 992 1,059 2.1%
Reconcil. to cons. fin. statements -715 -630 -755 -739 -811 -855 -897 3.8%
Total Revenue 3,464 3,020 3,198 3,526 3,857 4,209 4,559 4.7%
Annual change in revenue in %
Opto Semiconductors -15.6% -8.7% 6.7% 12.5% 14.8% 14.1% 13.0%
Automotive -7.3% -11.7% 9.1% 4.1% 6.1% 3.9% 2.6%
Digital -0.7% -20.7% 9.5% 7.7% 6.5% 6.6% 6.8%
- 45 -
The strong growth will be driven primarily by the Sensing, Illumination and Visualization & Laser
segments. In the Sensing segment, most of the revenue growth will be generated with 3D sensors.
Growth in the Visualization & Laser segment is anticipated from LED projectors with high
luminosity and new products such as LiDAR technology and Near-to-Eye (NTE) projection. LiDAR
technology allows the distance to objects to be measured using light pulses and is expected to
be adopted in the field of self-driving cars. NTE projection technology will be used in augmented
reality applications. In the Illumination segment, a development above the market growth is
planned. The planning projections are based on initiatives for customer-specific developments in
the fields of horticulture, UV-C and LED.
In the Automotive segment, the OS business unit expects a lower compound annual growth rate
compared to the other segments of 4%. It is expected that sales will not pass the level seen in
fiscal year 2019 prior to the corona pandemic until fiscal year 2022. Based on information from
IHS Markit, automobile production is forecast to fall by -21% globally in fiscal year 2020. Long-
term growth in the automotive sector will be attained by steadily growing content per car. It is
expected that this increase in content will come from rising penetration rates in forward lighting
and growing demand for pixelated light sources and ambient lighting in vehicle interiors.
The AM business unit anticipates compound annual revenue growth of approximately 2.1% over
the planning period. Based on the revenue of EUR 1,781 million in the year 2019, the revenue of
the AM business unit is projected to rise to EUR 2,021 million in the year 2025. In fiscal year 2020
a fall in automobile production is expected due to the corona pandemic and the general state of
the automotive sector. This will result in a 11.7% fall in revenue.
On account of the projected decline in sales in the field of traditional automotive lighting
technologies, much lower or even negative growth is projected from fiscal year 2024 onwards.
The long-term market decline expected in traditional automotive lighting technologies, which
comprises both OEM and aftermarket business, can be attributed to the rising penetration of LED
solutions. Nevertheless, the planning is based on the assumption that the Company can prevail
over its main competitors in a contracting market and manage to increase its market share.
The AM business unit expects to see a business related price erosion of a middle to high single-
digit percentage, whereby the erosion of prices is projected to be higher for LED technologies
than for established halogen-based products on account of the greater potential for productivity
gains and more intense competition.
- 46 -
Forecast growth in the AM business unit is primarily attributable to retrofit LED products for the
aftermarket and retrofitting market. With regard to retrofit LED products, the planning statements
are based on the assumption that the necessary regulatory approvals will be issued successively
from country to country starting in 2021 and that OSRAM will be able to maintain its market
leadership in the market for retrofitting and spare parts.
The DI business unit is forecast to enjoy compound annual sales growth of 2.1% between 2019
and 2025, representing a rise in revenue from EUR 934 million to EUR 1,059 million. The DI
business unit is currently confronted by disruptions to its supply chains and restrictions in the
entertainment sector on account of the corona pandemic. In light of the above, revenue is
projected to decrease by approximately -20.7% in fiscal year 2020. In the following fiscal year,
2021, business is expected to return to normal with solid revenue growth of roughly 9.5%. The DI
business unit expects to see a low single-digit per annum erosion in prices.
The revenue growth of the DI business unit over the planning period will be primarily generated
by the strategic focus on light management systems for connected buildings, industrial internet
of things (“IoT”) applications and LED luminaires for horticulture. Due to the lower barriers to entry
and more intensive competition this entails, the Horticulture market segment is assumed to see
less rapid sales growth in comparison to the projected development of the market as a whole.
The Digital Systems segment of the DI business unit is projected to grow by a compound annual
growth rate of 2% from 2019 to 2025. In this connection, it is assumed that the forecast sales will
trend slightly higher than that of the target market defined by OSRAM from fiscal year 2023
onwards. It is assumed that revenue in the lamps business of the Entertainment Lighting division
will decline over the long-term due to the intensive competition.
In addition to the planning projections for the various business units, the business planning of the
Company contains reconciliations for corporate items, consolidated intercompany sales, treasury
activities and other reconciliations. The most significant corporate items are governance functions,
income and expenses from pensions and contract manufacturing for Ledvance. The line item
consolidation, treasury and other items includes the planning projections for treasury activities
and the elimination of intercompany sales of the OS business unit for LED components it supplies
to the AM business unit.
- 47 -
The gross margin in fiscal year 2020 is projected to fall from roughly 26% to approximately 23%.
Thereafter it is projected to rise steadily to roughly 35% in 2025. The positive development in the
gross margin should be primarily attained by productivity measures in the OS business unit. The
productivity measures relate to savings in procurement and efficiency gains, including measures
aimed at increasing value added at the production facilities of the OS business unit. In addition,
improvements in the gross margin will be attained within the automotive business in the field of
sensing, due to cost-savings in the field of 3D sensing and due to business-related fixed cost
degression.
The gross margins of the AM and DI business units are also projected to improve slightly on
account of productivity measures, new product launches and volume effects.
With regard to the individual cost items in the business planning, which has been prepared using
the cost of sales method, the Neutral Valuer illustrates the development of human resources as
this cost factor has comprehensive relevance. The planned development of the headcount is
related to the planned measures to raise productivity. Due to the corona pandemic only a slight
increase in personnel expenses is planned for the fiscal year 2021. From fiscal year 2022 normal
regional increases in personnel expenses are projected and integrated in the expense items in the
business planning. For example, an annual increase of 3% in personnel expenses is assumed for
Germany. A significant reduction in the workforce is planned at group level in fiscal years 2020
and 2021, which will affect all business units and corporate functions. The global headcount will
fall in fiscal year 2020 from 23,486 to 21,714. A further reduction to 20,450 employees is planned
for fiscal year 2021. From fiscal year 2024 the headcount is projected to rise again. In fiscal 2025
a headcount of 20,748 is projected. The development of the headcount and the associated
personnel expenses are reflected in the cost of goods sold and the functional expenses addressed
below.
Research and development expenses are projected to decrease from EUR 403 million in fiscal
year 2019 to EUR 363 million in fiscal year 2025. Research and development expenses are planned
to decline until 2022. The decline is attributed to the current focus on profitability improvement
programs.
Selling and general administrative expenses are forecast to decline slightly in absolute terms
over the planning period. After a decline until the fiscal year 2022, a development with low growth
rates is then assumed. The decline in the ratio of selling and general administrative expenses to
revenue forecast for the planning period is to be achieved by savings in central functions and at
business unit level.
.
- 48 -
Other operating income is expected to increase to EUR 66 million in the fiscal year 2020. This is
primarily due to the release of provisions for contingent considerations related to the acquisitions
of Fluence and Vixar as well as the sale of OLED patents. In addition, other operating income in
the fiscal year 2020 includes the contractual participation in the sales of the subsidiary OSRAM
Continental in the amount of EUR 17 million. In the fiscal year 2021, the contractual participation
is expected to amount to EUR 27 million. No other operating income is projected from the year
2022 onwards, as the OSRAM Continental joint venture is scheduled to be separated on 1 October
2021.
With the exception of fiscal years 2020 and 2021, other operating expenses are budgeted at EUR 0
million. In fiscal year 2021 costs will mainly be incurred in connection with the reversal of the
OSRAM Continental joint venture.
The business planning considers transformation costs which mainly serve to improve
competitiveness and cushion structural market developments. Transformation costs affect the
cost of goods sold, research and development costs and selling and general administrative
expenses. In particular, substantial transformation costs of EUR 97 million and EUR 83 million are
provided for in fiscal years 2020 and 2021. In fiscal year 2020 transformation costs can be allocated
to the performance programs. In fiscal year 2021 the transformation costs are allocable to the AM
business unit with regard to the decline in the traditional business with halogen lights. In addition,
further (restructuring) costs are anticipated in relation to the retransfer strategy pursued with
regard to OSRAM Continental.
The EBIT margin is projected to come to -8.4% in 2020, the first year of the planning period,
slightly above the level of the previous year (-10.0%). A significant improvement is forecast over
the remainder of the planning period. The EBIT margin is projected to rise to 13.0% by fiscal year
2025.
In the first year of the planning period (2020), forecast depreciation and amortization amounts
to roughly 13.2% of revenue. The ratio of depreciation and amortization to revenue is assumed
to decrease to 6.8% by fiscal 2025. As goodwill impairments of roughly EUR 210 million were
incurred in fiscal year 2019, depreciation and amortization in the actual figures for 2019 are not
comparable to the years projected in the planning period. After eliminating these impairment
losses, the ratio of depreciation and amortization to revenue came to roughly 9% in fiscal year
2019, and depreciation and amortization to EUR 311 million in absolute figures. The relative
increase to 13.2% in 2020 is mainly due to the first-time application of IFRS 16. The right-of-use
assets from leasing agreements recognized in the balance sheet lead to an annual depreciation
charge of between EUR 40 million and EUR 47 million over the planning period.
- 49 -
EBITDA is expected to rise sharply over the planning period from EUR 176 million in 2019 to
EUR 903 million in the year 2025. To achieve this, the EBITDA margin is projected to improve
significantly over the course of the planning period to roughly 20% in fiscal year 2025.
In terms of the planned capital expenditures, a successive rise in investment is expected over the
planning period after contracting in 2020 as a result of the impacts of the corona pandemic.
Relative to revenue, the level of investment will increase from 3.3% to 6.8% in fiscal 2021. Over
the remainder of the planning period, an investment ratio (relative to revenue) of roughly 7% is
planned. Most of the investments will be made in the OS business unit. To that extent, the rise in
capital expenditure is largely due to the OS business unit where investments of approximately
11% and 12% p.a. relative to sales are expected from the year 2022 onwards. In the AM and DI
business units, the level of investment is assumed to remain relatively stable over the planning
period. The projected level of investment lies below the projected level of depreciation and
amortization over the entire planning period, which implies that non-current assets must decline
over the planning horizon.
- 50 -
Considering synergies in the valuation
As stated in section 4.1, it is advisable in the context of corporate agreements to make a distinction
between synergies prior to the agreement and post-agreement synergies. Pre-contractual
synergies are those that can be generated within the existing structure of the group (Sec. 311 et
seq. AktG), even without any corporate agreement being made (i.e. pseudo synergies/synergies
independent of the structural measure concerned: LG Stuttgart, 17 September 2018, 31 O 1/15,
ratio decidendi, p. 85). By contrast, contractual synergies require additional action to be taken
before they can be realized, whereby such measures can only be effected upon conclusion of a
domination and profit and loss transfer agreement (see Popp/Ruthardt, § 12
Bewertungsmethoden im Spiegel der Rechtsprechung, in: Fleischer/Hüttemann (publisher),
Rechtshandbuch Unternehmensbewertung, 2nd edition 2019, No. 12.28).
A joint analysis was conducted by ams and OSRAM with regard to potential structural measures
that should be taken into account during the business valuation. In the course of this analysis,
planned integration projects were examined to determine the extent to which they were realizable
even without the corporate agreement and what economic benefits could be realized by such
projects for the companies involved. In addition, it was analyzed to what extent additional effects
arose in this regard, which were not already considered in the planning projections of OSRAM in
the form of efficiency gains and/or intended strategic measures.
In this way, long-term pre-contractual synergies of EUR 54 million p.a. were identified. The
identified precontractual synergies and the associated implementation costs were considered in
addition in the business valuation by the Neutral Valuer. With regard to pre-contractual effects
not clearly attributable to ams or OSRAM in terms of location, the Neutral Valuer, after discussion
with the parties to the contract, assumed a split in half according to the documents available to
us.
Within the course of our audit procedures, we assessed an abundance of qualitative and
quantitative estimates of potential synergies, be they from Bain Capital, the Carlyle Group, Advent
or ams. We assessed the synergies derived and the additional underlying potential measures. In
order to establish a broader foundation for the conceivable synergies from a current perspective,
we extensively discussed the issue of synergies with both the managing board of OSRAM AG and
the management of ams Offer GmbH (see LG Munich I, 27 November 2019, 5 HK O 6321/17, ratio
decidendi, p. 55).
- 51 -
Based on the information provided to us and our findings made in the course of the audit, the
financial planning and the additional precontractual synergies considered by the Neutral Valuer
constitute all suitably substantiated effects that can be expected without the underlying measure
being conducted (i.e. the DPLTA). With regard to the effects that cannot be clearly attributed to
ams or OSRAM in terms of location, we believe that the allocation used by the Neutral Valuer is
appropriate in the given case.
- 52 -
Modified planning statements
The following summary presents the financial planning used by the Neutral Valuer for valuation
purposes taking account of the additional precontractual synergies. In addition, the Neutral Valuer
adjusted the planning statements to eliminate the activities of Fluxunit.
Modified Planning supplemented by pseudo synergies
FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY19-25
FY as of 30.09 Actual Plan Plan Plan Plan Plan Plan CAGR
mEUR mEUR mEUR mEUR mEUR mEUR mEUR in %
Revenue 3,464 3,020 3,198 3,526 3,857 4,209 4,559 4.7%
Cost of goods sold 2,578 2,330 2,313 2,465 2,609 2,821 2,982 2.5%
Gross profit 886 690 885 1,061 1,248 1,389 1,577 10.1%
Research and development costs 403 385 354 311 326 341 363 -1.7%
Marketing, selling & gen. admin. exp. 626 622 618 585 586 600 622 -0.1%
Elimination gen. admin. costs Fluxunit - 1 1 1 1 1 1 n/a
Other operating income 33 66 27 - - - - n/a
Other operating expenses 234 3 20 - - - - n/a
EBIT -345 -253 -79 166 338 449 592 n/a
Revenue and cost synergies - - 18 50 54 54 54
Expenses related to revenue and cost
synergies- - 4 6 1 - -
EBIT incl. pseudo synergies -345 -253 -65 210 392 504 647 n/a
EBIT incl. pseudo synergies -345 -253 -65 210 392 504 647
Depreciation and amortization 521 397 331 315 310 305 312
EBITDA incl. pseudo synergies 176 144 266 525 701 809 959
Annual change in revenue in % n/a -12.8% 5.9% 10.3% 9.4% 9.1% 8.3%
in % of revenue
Gross profit 25.6% 22.9% 27.7% 30.1% 32.4% 33.0% 34.6%
Research and development costs 11.6% 12.8% 11.1% 8.8% 8.4% 8.1% 8.0%
Marketing, selling & gen. admin. exp. 18.1% 20.6% 19.3% 16.6% 15.2% 14.2% 13.7%
Other operating income 1.0% 2.2% 0.8% 0.0% 0.0% 0.0% 0.0%
Other operating expenses 6.8% 0.1% 0.6% 0.0% 0.0% 0.0% 0.0%
EBIT-Margin incl. pseudo synergies -10.0% -8.4% -2.0% 6.0% 10.2% 12.0% 14.2%
Depreciation and amortization 15.0% 13.2% 10.3% 8.9% 8.0% 7.3% 6.8%
EBITDA-Margin incl. pseudo synergies 5.1% 4.8% 8.3% 14.9% 18.2% 19.2% 21.0%
- 53 -
Market environment
Possible factors affecting the development of the operating business of the OSRAM Group include
macroeconomic developments, the development of the relevant sales markets and the prevailing
competitive environment. In this regard, the Neutral Valuer initially presents the general economic
indicators for the key geographical sales markets of the OSRAM Group. Thereafter, it analyzes the
key market segments based on the structure of the business units. Due to the interdependent
development of the automotive industry and the overall economy, as well as the dependence of
the OSRAM Group on the automotive markets, the development of economic indicators is of
material significance for the future development of the OSRAM Group.
The forecasts of real GDP made by a variety of economic research institutes presented by the
Neutral Valuer consider the effects of the current corona pandemic. Falling rates of GDP are
forecast for the year 2020 for Germany, the euro area, the USA and globally. For China average
growth of 0.2% is forecast. For the year 2021 an economic recovery is forecast in all regions (see
Castedello/Tschöpel, WPg 2020, pp. 914, 917 for the typical evolution of economic crises).
Thereafter it is assumed that real GDP growth will differ from region to region. With regard to the
development of global real GDP, the Neutral Valuer listed average growth rates of -5.0% (2020),
5.0% (2021), 3.9% (2022), 3.4% (2023) and 3.1% (2024) based on forecasts by a variety of economic
research institutes for the years 2020 to 2024. From the year 2022 growth rates below and above
these figures are forecast for the euro area and China respectively.
With regard to the development of the inflation rate, the Neutral Valuer presents forecasts for
Germany, the euro area, China and the global market. After a fall in the inflation rate in 2020 due
to the slump in demand, with a possible knock-on effect in the year 2021, IHS Markit forecasts a
global inflation rate of around 2.4% to 2.5%. For the euro area an inflation rate of 1.7% is
anticipated in the year 2024 based on the above forecasts. This is slightly below the corresponding
inflation forecast for the USA (1.8%).
The Neutral Valuer has also drawn on a variety of market studies of relevance to the business units
and their segments in order to analyze the relevant market trends for the OSRAM Group in more
depth. Most of the market studies presented by the Neutral Valuer do not consider the impacts
of the corona pandemic.
- 54 -
With regard to the OS business unit, the Neutral Valuer presents the forecast for the market of
optoelectronic components provided by Omdia, an information service provider. Optoelectronic
components are components that create an interface between optical and electronic components.
In the wider sense, this includes all products that convert electronically generated data into light.
Based on a market study from Omdia, the market for optoelectronic components can be broken
down into LEDs with frequencies in the visible spectrum, optocouplers, infrared components,
optical switches and LED displays. According to the estimates issued by Omdia in June 2020 the
market for optoelectronic components between 2019 and 2025 will see average annual growth
of 0.7% after taking account of the impacts of the corona pandemic. However, when assessing
these growth projections it should be remembered that the global market for optoelectronic
components is very widely defined and that the relevant market for the OSRAM Group only
represents a section of it.
Due to the products it manufactures, the operating business of the OS business unit is largely
dependent on the development of the markets for automotive lighting technology and
consumer electronics. The development of the market for automotive lighting technology is
discussed in more detail under the AM business unit. With regard to the automotive sector, the
OS business unit focuses on the market segments for LED and laser-based products. Higher
growth rates are forecast for these market segments than for the total market for automotive
lighting solutions as the segments comprising traditional lighting solutions are forecast to decline.
The market segment of consumer electronics includes the market for sensors in the field of
wearables (e.g. smart watches, fitness trackers) and smart phones. According to the market studies
issued by Technavio that were drawn on by the Neutral Valuer from March 2018 and June 2019
forecast average growth of 7.3% p.a. in the mobile and electronics segment for the years 2019 to
2022, before considering the impacts of the corona pandemic. According to the approximate
consideration of the effects of the corona pandemic by the Neutral Value, this would result in
average annual growth of 1.4% for the years 2019 to 2022.
The global market for sensors for smartphones is very competitive and characterized by intensive
price-based competition. Consequently, the focus is on realizing efficiency gains and economies
of scale. Only a few competitors can shield themselves from the price pressure thanks to their
innovative strengths or potential for differentiation.
The development of the AM business unit depends directly on the development of the market
for automotive lighting technology, which, in turn, depends materially on the dynamic of the
automobile industry. Global automobile production is subject to economic cycles and depends
on the general economic development, disposable income and consumer spending and
preferences.
- 55 -
The following summary presents the estimated trends issued by IHS Markit in August 2020 for
global light vehicle production until the year 2025.
Source: IHS Light Vehicle Production, August 2020.
On this basis, a slump in automobile production is forecast for the year 2020. Thereafter, recovery
is expected to set in. Over the full period from 2019 to 2025 the compound annual growth rate is
forecast to come to 0.8%. Production volume is not expected to match the level of 2019 until
2023/2024.
The market for automotive lighting technology is influenced by a number of factors. A
fundamental factor lies in the steady trend towards low-emission intelligent mobility, with
growing demand for lighting systems. Particularly in the field of electromobility, the development
of more energy-efficient lighting systems plays a great role. In light of their low energy
consumption, LEDs are finding ever more frequent use. Other growth factors in the field of
automotive lighting technology could lie in the rising demand for premium vehicles in the APAC
region and the ever more stringent requirements on safety systems, both from customers but also
governments. Material risks arise from a potential stagnation in the production and sales of new
vehicles and the resulting decline in demand for automotive lighting systems. An additional risk
lies in the delay in introducing advanced driver assist systems (ADAS) which could retard the
development of driverless car platforms and can therefore negatively influence the demand for
LED and laser-based intelligent lighting systems.
88.9
70.5
79.585.0
88.390.9
93.5
0
10
20
30
40
50
60
70
80
90
100
2019 2020 2021 2022 2023 2024 2025
in m
illio
n u
nits
Automotive market
Development of global Light Vehicle Production (in million units)
CAGR
0.8 %
- 56 -
The following chart presents the forecast for the automotive lighting market until the year 2024
issued by the research institute Technavio in June 2020.
Source: Technavio, Global Automotive Lighting Market 2020-2024 (June 2020).
On this basis, the automotive lighting systems market is forecast to grow by a compound annual
growth rate of 5.4% in the period from 2019 to 2024 (see Technavio, Global Automotive Lighting
Market 2020-2024, June 2020).
Generally, the global market for automobile lighting systems can be described as diverse. It is
characterized by regional differences in terms of the intensity and dynamics of competition. Due
to the high number of competitors and the associated price-based battle for market share, the
APAC region is seen as the most competitive region. Aside from the OSRAM Group, the world
market is dominated by global players such as Koito Manufacturing Co., Ltd., Tokyo, Japan (“Koito
Manufacturing“) and HELLA GmbH & Co. KGaA, Lippstadt, Germany (“HELLA“), as well as regional
companies.
The DI business unit combines various products and solutions in the field of digital lighting
technology. Digital lighting technology allows lighting to be intelligently controlled in a variety of
applications, such as lighting for agricultural and gardening applications (horticulture), outdoor
illumination for buildings, lighting systems for the entertainment sector and smart home
applications.
15.4 16.3 17.3 18.3 19.5 20.7
6.56.8
7.17.4
7.78.17.1
7.47.7
8.18.5
8.9
0
5
10
15
20
25
30
35
40
2019 2020 2021 2022 2023 2024
in b
illio
n U
SD
Market for automotive lighting
per region in billion USD
APAC EMEA Americas
CAGR
5.4 %
- 57 -
To test the plausibility of the projected development of the DI business unit, the Neutral Valuer
has referred to a number of market studies for general lighting applications, horticulture lighting
and entertainment lighting.
The market for general lighting comprises fixed light sources that have a practical or aesthetic
effect. The products can generally be differentiated between traditional lighting technologies (e.g.
light bulbs, fluorescent lamps) and LED lighting. The LED market is the market segment that is
most relevant to the OSRAM Group. A shift from traditional lighting technologies towards LED
based technologies is expected within the market for general lighting. The main growth drivers of
the global market for general lighting are an increasing focus on energy-efficient technologies
and the associated government incentives and support programs, the rising population and
increasing urbanization.
According to the forecast from Technavio issued in February 2020 for the period from 2019 to
2024 – which does not consider the potential effects of the corona pandemic – forecasts a
compound annual growth rate of 5.5% in the global market for general lighting.
Although the total cost of LEDs is relatively low in comparison to traditional lighting technologies,
the high acquisition costs when making the shift from traditional luminaires to LEDs represents a
barrier to their growth. In this connection, there is a risk that the ban or regulations on traditional
lighting technologies are actually slowing market growth (see Technavio, Global General Lighting
Market 2020-2024, pp. 100-107). As the construction industry is an important customer for LED
products, the LED market is also affected by the economic cycles affecting the construction
industry. There is intensive competition on the market for general lighting solutions. The global
players include widely diversified corporations such as Panasonic Corporation, Osaka, Japan, and
Schneider Electric SE, Ile-de-France, France, through to focused providers such as the OSRAM
Group, Acuity Brands, Inc., Atlanta, USA (“Acuity Brands“), and Signify N.V., Eindhoven,
Netherlands (“Signify“).
- 58 -
The Entertainment Lighting segment comprises solutions for cinemas, theatres, and concert
stages, for example. Before considering the possible impacts of the corona pandemic, Arizton
forecasts a compound annual growth rate of 4.3% for the period from 2019 to 2025 (Arizton,
Stage Lighting Market February 2020, p. 35). Generally, it can be assumed that the entertainment
market – especially with regard to its dependence on large events – is exposed to material
uncertainties from the potential impact of the corona pandemic. According to information
provided by OSRAM, the market for Entertainment Lighting came to a stillstand during the corona
pandemic. Cinemas and theater performances as well as concerts were cancelled or subject to
severe restrictions. Consequently investments in the corresponding lighting systems were cut back
significantly. Currently, it cannot be foreseen when the volume of investment in lighting systems
in the entertainment industry will pick up again or whether the forecast growth trend can be
realized once the corona pandemic is over.
The Horticulture market segment comprises lighting solutions that are used in agriculture,
gardening and the cultivation of cannabis in greenhouses. Here, the increasing use of LED lighting
results in greater energy efficiency compared to conventional lighting systems.
Based on an estimate from BIS Research from September 2019 the “Global LED Grow Lights
Market“ is forecast to see a CAGR of 23.1% between 2019 and 2024, disregarding the effects of
the corona pandemic. The main growth factors are the expected population increase and the
associated rise in demand for food as well as the general scarcity of food. In addition, the market
for medicinal cannabis is viewed as a growth market. A risk factor for the LED growth lights market
lies in the relatively high initial investment, which dampens their appeal in comparison to
traditional lighting solutions. Key competitors in the horticulture segment are Signify and Everlight
Electronics, New Taipei City, Taiwan (“Everlight Electronics“). Competition in this segment is
intensive and technology driven.
- 59 -
Competitive environment
In order to analyze the competitive environment we reviewed the historical figures filed in the
databases of Bloomberg for the years 2012 to 2019 and the financial analyst assessments for the
years 2020 to 2025 (where available) for the peer group companies of OSRAM AG. To allow
comparability we allocated the financial analysts’ assessments and the historical figures for the
peer group to the fiscal years of OSRAM AG.
In addition to the peer group companies presented under 6.3.e) we included Nichia Corp. in the
analysis of the competition for the years 2012 to 2019. No financial analyst assessments were
available for this company owing to the fact that it is not listed on a public exchange.
Generally, we would like to draw attention to the fact that there are indications of a systematic
distortion in analyst assessments (see Ballwieser/Hachmeister, Unternehmensbewertung, 5th
edition 2016, p. 128). At any rate, there are some studies that show that, due to disincentives,
analysts are systematically more optimistic than other market players
(see Jäckel/Kaserer/Mühlhäuser, WPg 2013, p. 365, 382).
The following summary presents the rate of revenue growth for the period from 2012 to 2025
for the peer group companies. In addition, the chart also presents the historical and projected
development of OSRAM AG based on the planning projections.
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Growth of revenue
Lower to upper quartile - Peer group OSRAM AG Mean - Peer Group
- 60 -
With regard to the 2015 figures of OSRAM AG, the sale of the LEDVANCE division was eliminated.
The analysis shows a high degree of volatility in the rate of revenue growth of OSRAM AG for the
years 2012 to 2019. Historically, the rate of revenue growth of OSRAM AG was sometimes above
the mean rate of revenue growth for the peer group, and sometimes below it. In particular, in the
years 2021 to 2025 the growth rates depicted in the planning statements of the OSRAM Group
are significantly above the mean of analyst forecasts for the peer group companies.
In this regard, the rate of revenue growth presented in the planning statements of the OSRAM
Group can be characterized as ambitious.
The following summary presents the trend in the EBITDA margins of the peer group companies
for the period from 2012 to 2025. In addition, the chart also presents the historical and projected
development of OSRAM AG based on the planning projections.
In the past, the EBITDA margin of the OSRAM Group displayed a high degree of volatility. Only in
some years did the EBITDA margin of the OSRAM Group lie above the mean EBITDA margin of
the peer group companies. The EBITDA margin depicted in the corporate planning of the OSRAM
Group (including the forecast synergies) is forecast to rise significantly. The EBITDA margin of the
OSRAM Group (including unreal synergies) projected for the end of the planning horizon lies
significantly above the mean of the peer group, which remains relatively constant over the course
of time.
In this regard, the development of the EBITDA margin shown in the OSRAM Group’s plan can be
characterized as ambitious.
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
EBITDA - Margin
Lower to upper quartile - Peer Group OSRAM AG (incl. pseudo synergies)
Mean - Peer Group
- 61 -
Findings of our audit procedures
In the course of our audit procedures we analyzed the planning statements on the basis of
normalized historical figures. We assessed the statements made by the Neutral Valuer on the
development of the relevant markets and the development of competition. In addition, we
discussed the key planning assumptions and the respective markets and competitive
environments in depth with various industry experts from OSRAM AG and the officers responsible
for the planning projections within the OSRAM Group and its respective business units.
Based on the information provided to us and the findings obtained in the course of our audit, we
are of the opinion, in accord with the Neutral Valuer, that the planning statements are ambitious.
Our audit opinion remains unaffected.
The planning statements project a profitable growth. To this extent, there must be both strong
sales growth and a simultaneous improvement in margins. In numerous segments, the planning
statements project a rate of sales growth that is above the assumed growth rates for the respective
markets, which implies that additional market shares must be won. In addition, a key aspect of the
projected revenue growth can be attributed to new products. These are naturally subject to grave
uncertainties in terms of the requirements placed on production, the expected volume of demand
and reactions from competitors (competing products). In some cases there are also uncertainties
from a current perspective related to the regulatory framework, such as for LED retrofits. In
addition, the products offered by OSRAM are generally subject to rapid price erosion. Maintaining
the same margin, or even improving the margin, can only be attained by constant improvements
in productivity or (further) volume growth.
To check the plausibility of the US Dollar/EUR exchange rates assumed in the preparation of the
plan, we have determined forecast rates on the basis of inflation differences (relative purchasing
power parity), forward rates (interest parity) and analysts' estimates. According to our findings,
the exchange rates assumed here do not result in a disadvantage for minority shareholders.
- 62 -
c) Other Planning Components
Financial result
The financial result was calculated by PwC based on the income statement and balance sheet
planning using cash flow planning, taking into account the financial income and expenses
expected by the company and the distribution ratio set for the detailed planning period.
The starting point of the financial planning to determine the financial result were the interest-
bearing receivables and liabilities as at September 30, 2019.
In the course of our audit we assessed the net interest income considered by the Neutral Valuer
in the valuation model based on the current financing structure and conditions, the anticipated
capital requirements for the future and surpluses and the assumed distributions.
In accordance with the valuation date principle, financial surpluses which have already accrued to
the owners of the company or whose use has been determined are no longer to be considered
for the derivation of the company value. According to the information provided to us, it is planned
not to pay a dividend for the financial year 2019/20, so that no accrual issues arise in this respect.
Net interest income has been appropriately calculated.
Corporate taxation
OSRAM AG is subject to tax on the basis of the currently applicable corporate tax legislation. The
income tax burden considers trade tax and corporate income tax as well as the solidarity
surcharge on corporate income tax that is charged on domestic income as well as corporate
taxation charged in other countries as well as withholding taxes.
Existing tax loss carryforwards were taken into account by PwC to reduce current tax expenses. If
unused tax losses are already considered in the integrated calculation of capitalized earnings, they
cannot be considered as a separate asset otherwise they would be double-counted in the
valuation model (see Popp, Berücksichtigung von Steuern, in: Peemöller (publisher),
Praxishandbuch der Unternehmensbewertung, 7th edition, 2019, pp. 1425, 1429).
Deferred taxes are not considered due to the fact that they have no cash impact.
- 63 -
We reviewed the tax rates applied and the calculation of the forecast income tax in the course of
our audit work. The tax expenses considered by the Neutral Valuer in the individual years of the
planning projections and in the terminal value have been correctly derived.
Minority interests in net profit
In keeping with the principle of full consolidation, the projected profits or losses of fully
consolidated entities, in which – from the perspective of OSRAM AG – minority interests hold a
stake, must be considered fully in the consolidated income statement. Consequently, the result
was corrected by the amount allocable to the minority interests to derive the financial surpluses.
The minority interests considered by the Neutral Valuer arise in the years 2020 and 2021 from the
joint venture partner’s participation in OSRAM Contintental, which is fully consolidated.
We verified the calculation used to determine shares in profit attributable to minority interests.
Minority interests in net profit have been correctly considered.
d) Terminal Value and Retained Earnings in the Terminal Phase
The financial surpluses available for distribution can be more plausibly assessed and more reliably
forecasted for a period of time closer to the valuation date than for a more remote future. In
addition, detailed business planning is generally only prepared for a period of three to five years
(detailed planning phase). After this period (inevitably simplified) assumptions must be made on
the financial surpluses to arrive at the financial surpluses that can be expected in the indefinite
future. The level of earnings in the first year of the terminal phase can be reached at the end of
the detailed planning phase or lie higher (or lower). The terminal value can therefore lie below the
earnings of the last year of the planning or individual years in the detailed planning phase. When
setting the terminal value, an assumption is made of an “ideal steady state” in terms of financial
performance, financial position and cash flows.
According to IDW practice statement 2/2017 No. 54, the terminal value must be derived
independently by the Neutral Valuer taking account of his separate analyses. To this extent, the
final year of the detailed planning phase cannot be adopted for the terminal value without further
reflection. The terminal value must consider the realizable returns that can be expected for the
long term. Indicators of the terminal value can be derived from normalized historical earnings and
the detailed planning phase as well as from industry indicators (see IDW practice statement
2/2017, No. 57).
- 64 -
Generally the plausibility of the terminal value is tested on the basis of margins (e.g. EBIT/EBITDA
margins). In particular, a comparison with average margins is suitable for companies that are
exposed to economic cycles on competitive markets and also those companies which report
fluctuating returns due to the nature of their business model and/or accounting. The prevailing
opinion in business theory is that the terminal value should reflect the average earnings for the
indefinite future (for more details see Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der
Rechtsprechung in: Fleischer/Hüttemann (publisher), Rechtshandbuch Unternehmensbewertung,
2nd edition, 2019, Nos. 12.52 et seq.).
The planning may be based on incentives or targets if, assuming continuity in market factors, it
contains a level of earnings that has never before been attained even in the best or worst of times
without any plausible reason given (see OLG Düsseldorf, 17 December 2017, 26 W 8/15, No. 39
(BeckRS)).
The Neutral Valuer derived the revenue considered in the terminal value taking the last year of
the detailed planning phase, 2025, as a point of departure. In addition, effects arising from the
Entertainment Industries and Digital Systems segments were considered in the form of an annuity,
which was rolled forward into the terminal phase.
The Neutral Valuer derived the EBITDA margin in the terminal phase from the average EBITDA
margins of the last three years of the detailed planning phase (2023 to 2025) prior to considering
synergies in the valuation. The impacts on EBITDA in the terminal value from the Entertainment
Industries and Digital Systems segments were considered in the form of an annuity. In sum, this
resulted in a sustainable EBITDA margin prior to synergies of 18.9%.
The sustainable EBITDA margin prior to synergies in the terminal phase was then adjusted
upwards to account for the effect of potential synergies. In conclusion, the Neutral Valuer set the
sustainable EBITDA margin at 20.1%.
The Neutral Valuer set the level of investment in the terminal phase at EUR 329 million based on
a sustainable investment ratio of 7.0% (relative to revenue). When deriving this investment ratio,
the anticipated revolving investments in right-of-use assets arising from leases were considered
in the form of an annuity.
- 65 -
In the course of our audit procedures we verified the calculations and explanations made by the
Neutral Valuer and the parties to the Agreement relating to the calculation of the terminal value
and the level of investment derived for the terminal phase. In conclusion, we are of the opinion
that the EBITDA margin assumed by the Neutral Valuer is ambitious when viewed against the
historical development, the trends and assumptions made for the detailed planning phase and
the EBITDA margins forecast for the peer group by financial analysts. Our audit opinion is not
affected by this.
According to our findings, the level of investment set for the terminal phase has been properly
derived.
In the terminal phase, it is generally assumed that there will be inflation-induced growth. Even if
all financial surpluses are distributed (sometimes referred to as fictitious full distribution) the
capital remaining in the company is subject to inflation-induced growth. Consequently, the assets
and liabilities presented in the final balance sheet of the detailed planning phase are rolled
forward in the terminal phase after considering a growth factor for inflation (see WPH Edition:
Bewertung und Transaktionsberatung, 2018, Chap. A No. 455). To finance growth in the terminal
phase, certain components of the terminal value must definitely be retained otherwise it would
be impossible for the company’s leverage to reach a steady state. This is referred to as growth-
related retention of earnings (see Popp Der Konzern 2019, pp. 105, 108 et seq.). This can already
be deduced from the fact that line items that are driven by purchases or sales (e.g. working capital)
will be subject to rising prices and also replacements of capital goods are subject to inflation. In
other words, the line items of the income statement and the line items of the statement of financial
position are expected to grow each year at the rate of the growth factor assumed for the terminal
phase. An exception are those line items of the balance sheet whose changes do not affect cash,
such as deferred taxes, or when no growth is assumed for them in the terminal phase, e.g.
historical goodwill. From an accounting perspective, growth-related retained earnings can be
calculated from multiplying economic equity with the growth rate at the end of the detailed
planning phase (see Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der Rechtsprechung,
in: Fleischer/Hüttemann (publisher), Rechtshandbuch Unternehmensbewertung, 2nd edition,
2019, No. 12.56).
In order to finance growth in the terminal phase, retained earnings must be considered at a rate
equal to the growth rate related to economic equity as at 30 September 2025 (see OLG Frankfurt
a.M., 17 January 2017, 21 W 37/12, Nos. 91 et seq. (BeckRS); OLG Düsseldorf, 12 November 2015,
26 W 9/14, No. 61 (BeckRS); OLG Stuttgart, 5 June 2013, 20 W 6/10, No. 181 (juris)). When deriving
economic equity those line items which do not affect cash need to be eliminated.
- 66 -
The level of investment assumed for the terminal phase generally lies above the rate of
depreciation and amortization that applies in the terminal phase (see Popp, Der Konzern, pp. 105,
108). By contrast, the Neutral Valuer set the level of investment in the terminal phase at the same
level as depreciation and amortization applying to the terminal value. Consequently, the “cash
flow relevant adjustments” of EUR 4 million presented separately on p. 94 of the valuation report
merely represent the amount necessary to account for the inflation-induced development of
working capital. The retained earnings remain in the business and serve to generate the growth
and the associated rise in the business value after the last year of the detailed planning phase.
e) Discount Rate
The equity value is determined by discounting future distributable earnings to the valuation date.
The discount rate represents the return on an alternative investment that is equivalent in terms of
maturity, risk and taxation to the cash flows originating from an investment in the company being
valued (IDW S1 2008 No. 114).
When identifying the return obtainable on an alternative investment, reference is generally first
made to the returns available on the capital markets for equity investments (in the form of a stock
portfolio). These returns can be split into a risk-free rate and a risk premium expected by the
shareholders for their assumption of entrepreneurial risk.
Risk-free rate
The Neutral Valuer has derived the risk-free rate from the interest curves for German government
bonds, as recommended by the FAUB.
Based on the interest curve data published by Deutsche Bundesbank for the three months period
ending upon completion of our valuation work a risk-free interest rate of 0.0% was derived.
The interest curves published by the Deutsche Bundesbank were chosen as the data source. The
corresponding parameters (time series, “wt3201” to “wt3206”) have been taken from the website
of the Deutsche Bundesbank.
- 67 -
The spot rates for hypothetical zero bonds can be derived from these parameters and the interest
curves for government bonds traded on the market with a residual term of up to 30 years can be
estimated. Based on the observable trends in the parameters used in this estimate, their limited
use for extrapolating the spot rates further into the future becomes apparent. Due to a lack of
available market data for publicly-traded bonds that are needed to estimate the interest rates on
zero bonds in the period beyond the 30-year horizon, and due to the general planning
uncertainty, the FAUB (see IDW-FN 2008, p. 491) is of the opinion that the interest rates on the
zero bonds with the longest available residual terms can be rolled forward for the terminal value.
To smooth out volatility, not only the interest data applying on the valuation date have been used
but also the average values for the three months preceding the valuation date (see OLG Munich,
12 May 2020, 31 Wx 361/18, No. 54 (BeckRS); OLG Frankfurt, 27 September 2019, 21 W 64/14.
ratio decidendi p. 21; LG Munich I, 2 December 2016, 5 HK 5781/15, No. 118 (juris); etc.
Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der Rechtsprechung, in:
Fleischer/Hüttemann, Rechtshandbuch Unternehmensbewertung, 2nd edition 2019, No. 12.70).
This calculation using a three-month period is based on the WpÜG-AngebV in accordance with
Secs. 187 and 188 (2) BGB.
On grounds of practicability, the courts have deemed that the spot rates can be translated into a
uniform equivalent discount rate (see OLG Düsseldorf, 14 December 2017, 26 W 8/15, No. 50
(BeckRS); OLG Stuttgart, 27 July 2015, 20 W 5/14, ratio decidendi p. 29; OLG Munich, 18 February
2014, 31 Wx 211/13, No. 19 (juris)).
In accordance with the recommendation of the FAUB (see IDW-FN 2005, pp. 555 et seq.; IDW-LIFE
2016, pp. 731 et seq.) the uniform risk-free rate under 1.0% has been rounded to the nearest 1/10
percentage point. Such rounding (relating to the corresponding rounding to the nearest 1/4
percentage point for rates higher than 1.0%) has been approved by the courts (see OLG Munich,
12 May 2020, 31 Wx 361/18, No. 61 (BeckRS); OLG Munich, 6 August 2019, 31 Wx 340/17, Nos. 50
et seq. (BeckRS); OLG Karlsruhe, 1 April 2015, 12a W 7/15, No. 80 (juris)). The claim that such
rounding results in “suppression of precise knowledge” (see Knoll/Kruschwitz/Löffler, RWZ 2019,
pp. 139, 143) is countered primarily by technical reasons inherent to the process of compiling or
auditing a business valuation, particularly for all those business valuations where the end of the
valuation or audit work lies before the actual date of the general meeting (see Popp, WPg 2016,
pp. 926, 928). The OLG Munich has explicitly raised this point and stated that rounding essentially
serves the purpose of facilitating planning certainty and legal assurance and serves the
information needs of the minority shareholders (see OLG Munich, 12 May 2020, 31 Wx 361/18,
No. 64 (BeckRS)).
The risk-free rate is adjusted to account for typified income tax (25.0% plus the 5.5% solidarity
surcharge). The tax-adjusted risk-free rate thus comes to approximately 0.0%.
- 68 -
We have verified the calculations and come to the conclusion that a risk-free rate of 0.0% applies
to the three months period ending upon conclusion of our audit work. We are of the opinion that
a pre-tax risk-free rate of 0.0%, or 0.0% after tax respectively, is appropriate. Please see the next
section on the risk premium for a discussion of the consequences of the historically low interest
rates for the required return on equity.
With regard to the review of the risk-free rate, we refer, as a purely precautionary measure, to the
fact that the risk-free rate refers to an indicator that relates to the respective cut-off date but is
not an indicator for a (single) cut-off date (see LG Hamburg, 29 June 2015, 412 HKO 178/12, No.
102 (justizportal Hamburg); LG Munich I, 14 February 2014, 5 HKO 16505/08, ratio decidendi p.
33). Moreover, the three-month period preceding the extraordinary general meeting ends on 3
November 2020 (see OLG Munich, 12 May 2020, 31 Wx 361/18, No. 59 (BeckRS); OLG Frankfurt,
26 January 2015, 21 W 26/13, No. 42 (juris)). When an annual general meeting is convened in the
morning, it is unavoidable that parameters such as share prices or interest curves measured and
published at the end of trading for that date cannot be considered in the valuation.
Risk premium
When deriving the risk premium used to determine an objectified business value, the subjective
risk appetite of individual shareholders is not the relevant parameter, but the general patterns on
the market. It may be assumed that investors accept a particular risk when investing in companies
(investor risk). The risk premium can be derived empirically from equity yields obtainable on the
capital markets by using capital asset pricing models (CAPM, tax-CAPM). The capital asset pricing
model enjoys extraordinarily high acceptance in both national and international valuation practice
and is therefore justifiably considered to be state of the art (see, as representative of all sources:
van Rossum, Münchener Kommentar zum Aktiengesetz, 5th edition 2020, § 305 No. 147).
The use of the CAPM or the tax-CAPM is viewed by the majority of courts and the general opinion
found in the professional literature as the prevailing method for deriving an objectified risk
premium (see WPH Edition, Bewertung und Transaktionsberatung, 2018, Chapter C, No. 123;
Dörschell et al, Der Kapitalisierungszinssatz in der Unternehmensbewertung, 2nd edition, 2012, pp.
27 et seq.). The use of CAPM and tax-CAPM corresponds to the rulings handed down by the
higher regional courts (see OLG Munich, 30 July 2018, 31 Wx 122/161, ratio decidendi p. 21; OLG
Munich, 30 July 2018, 31 Wx 136/16, ratio decidendi, p. 9; OLG Frankfurt, 17 January 2017, 21 W
37/12, No. 105 (BeckRS); Ruthardt/Popp, AG 2019, pp. 196, 200).
- 69 -
Where isolated criticism has been made of CAPM, it generally refers to the fact that CAPM also
uses a number of parameters that have to be assumed by the independent valuer. This applies to
all other capital market models, regardless of their complexity. However, the advantage of CAPM
lies in the fact that the relevant parameters have been clearly identified and thoroughly discussed
in the professional research and also in practice and in court judgments. For this reason alone, the
use of CAPM is preferable to a mere ad-hoc estimate without any theoretical foundation. It can
also be confirmed that as of today, no other capital market model exists that is superior to CAPM
(for a critical view see Arbitrage Pricing Theory und dem Mehrfaktorenmodell from Fama/French:
LG Munich I, 28 March 2014, 5 HK O 18925/08, ratio decidendi pp. 44 et seq.; LG Munich I, 14
February 2014, 5 HKO 16505/08, ratio decidendi pp. 43 et seq., and on the Dividend Discount
Model: OLG Frankfurt, 30 August 2008, 21 W 14/11, Nos. 64 et seq.).
Because equity yields and risk premiums are fundamentally affected by income taxes, tax-CAPM
offers a more real explanation of empirically observed equity yields as it extends CAPM to consider
the explicit effect of personal income taxes. In particular, the model considers the different
taxation treatment of interest income, dividends and capital gains.
According to tax-CAPM, the discount rate is composed of a risk-free rate that has been reduced
by a standard income tax rate and the after-tax risk premium identified using tax-CAPM. The
complex character of a company’s specific risk premium is split into two empirically observable
factors: the market risk premium and the beta factor.
When it comes to deriving the after-tax market risk premium various concepts are available. As
far as is apparent, the study from Stehle in the year 2004 (half-income method) is the only study
to date on historical market risk premiums after personal tax. When calculating implied after-tax
market risk premiums, Beumer links a capitalized earnings model to market capitalizations and
analyst estimates to derive anticipated earnings and cash flows (see Beumer, CF 2015, pp. 330 et
seq.) Finally, financial models can be drawn on to derive the after-tax market risk premium from
the before-tax market risk premium (see IDW S1 2005, WPg 2005, pp. 1303 et seq.). Generally,
after-tax market risk premiums can be derived using the tax-CAPM considering the respective tax
regime and the interaction of stock yields, assumptions on the normal duration of shareholdings,
pay-out ratios and last, but not least, the respective level of the risk-free rate (see Popp, WPg
2020, pp. 836 et seq.).
- 70 -
Market risk premium
The courts generally refer to the statement of the BGH by which “that method that is recognized
by professional practice and customary in practice” is decisive (for example, see OLG Stuttgart, 20
August 2018, 20 W 2/13, No. 61 (BeckRS); BGH, 29 September 2015, II ZB 23/14, Nos. 33, 42 (juris);
BGH, 12 January 2016, II ZB 25/14, No. 21 (juris)). The same principle has to apply to the
parameters used when applying the valuation method; i.e. also the market risk premium.
Consequently, the methodology used to derive the parameters and the aspects of the individual
parameters must be recognized by the profession and customary in practice. However, based on
the state of the art, one single empirically accurate market risk premium that applies no matter
what conditions prevail on the capital markets cannot be determined (see OLG Düsseldorf, 14
December 2017, 26 W 8/15, No. 52 (BeckRS)).
At least, it cannot be the role of the courts to develop a valuation methodology that resolves the
differences in opinion in the profession, particularly not for the market risk premium, when there
is a range of different studies and publications with various motivations, calculation methods,
databases and quality. In practice, the acknowledged expert opinion (OLG Düsseldorf, 10 April
2019, 26 W 6/17, No. 55 (BeckRS)) is found in the recommended ranges published by the FAUB,
which are consequently regularly referred to by the courts as a proper foundation for assessing
the market risk premium in accordance with Sec. 287 (2) ZPO (see OLG Bremen, 29 March 2019, 2
W 68/18, ratio decidendi p. 14; OLG Stuttgart, 26 June 2019, 20 W 27/18, ratio decidendi p. 22; OLG
Düsseldorf, 5 September 2019, 26 W 8/17, ratio decidendi p. 23; OLG Frankfurt, 27 September
2019, 21 W 64/14, ratio decidendi p. 22; OLG Frankfurt, 26 January 2017, 21 W 75/15, No. 73
(BeckRS)).
In its publication from October 2012, the FAUB decided in favor of a higher range of 5.0% to 6.0%
for the after-tax market risk premium compared to previous recommendations (an after-tax
market risk premium of 4.0% to 5.0%). In more recent rulings handed down by the various higher
regional courts on valuation dates covered by this recommended range, the mean of 5.5% is
regularly accepted as appropriate (see Ruthardt/Popp, AG 2020, pp. 322, 326 et seq.; OLG
Stuttgart, 4 May 2020, 20 W 3/19; OLG Stuttgart, 3 April 2020, 20 W 2/17; OLG Bremen, 15 May
2020, 2 W 47/19; OLG Schleswig, 9 March 2020, 9 W 169/15 (6.0%); OLG Düsseldorf, 30 April 2018,
26 W 4/16; OLG Dresden, 16 August 2017, 8 W 244/17; OLG Frankfurt, 26 January 2017, 21 W
75/15; OLG Celle, 17 June 2016, 9 W 42/16).
- 71 -
In a number of rulings from the OLG Munich in the years 2018 and 2019 for valuation dates in the
years 2013 and 2014, the court has been more reticent towards applying the mean of the range
recommended by the FAUB in September 2012 for the market risk premium after personal income
tax of 5.5% and rather confirmed the opinion of the LG Munich I for a market risk premium after
personal tax of 5.0%. Nevertheless, in its ruling dated 12 May 2020, the OLG Munich decided in
favor of applying the mean of the range recommended by the FAUB of 5.5% for a valuation date
lying in March 2016 (see OLG Munich, 12 May 2020, 31 Wx 361/18, No. 66 (BeckRS)).
The FAUB constantly monitors developments on the capital markets to review whether it should
adjust its recommended range. To this end, it takes a pluralistic approach, drawing on historical
stock yields and market risk premiums, long-term real stock yields and ex-ante analyses of implied
market risk premiums (for a detailed justification of this pluralistic approach see Castedello et al.,
WPg 2018, pp. 806, 806-825). The recommended range is nevertheless not based solely on the
returns expected by players on the capital markets without any connection to the realities existing
on the capital markets. Nor does it pursue another conceivable approach, one favored by the
Austrian auditing profession, of setting a range of stock yields from which the market risk
premium can be inferred by deducting the current risk-free rate applying on the valuation date.
The recommendation of the Austrian working group on business valuations of the Fachsenat für
Betriebswirtschaft der Kammer der Wirtschaftsprüfer issued on 17 October 2017 is based solely
on the implied costs of capital, from which a range for the total stock yield of between 7.5% and
9.0% has been derived (see Bertl, WPg 2018, p. 805; Rabel, BewP 2018, p. 2).
The latest analyses from the FAUB indicate a slight decrease in total stock yields (prior to personal
taxes) over the course of time – particularly in the short period since 2012/13. However, this
decrease does not in any way reflect the decrease in the risk-free rate (i.e. the return on German
government bonds). Total stock yields therefore lie in a range between 7% and 9% (before
personal tax). In this regard, the focus of the new recommended range for the costs of capital
does not lie at the lower end of the range. Due to the fact that the recommended range to date
(with a maximum market risk premium of 7.0% before tax) does not result in costs of capital that
match those empirically observed on the capital market, on account of the current situation on
the capital markets, the upper limit of the recommended range was lifted to a market risk premium
of 8.0% before tax. When it comes to setting the lower end of the range, the FAUB
recommendation states that it has taken account of the possibility that the observed total stock
yields on the capital markets could slip downwards slightly over the course of time (see FAUB,
IDW Life 2019, pp. 818, 819). The lower end of the range for the pre-tax market risk premium of
5.5% was revoked and set at an amount of 6.0% (see Popp, WPg 2020, pp. 836, 847). Before this
backdrop, the FAUB passed a resolution at its meeting on 22 October 2019 to adjust the
recommended range for the after-tax market risk premium slightly upwards to a range of 5.0% to
6.5% (see IDW Life 2019, pp. 818 et seq.).
- 72 -
For valuation purposes, the range recommended by the FAUB must be condensed to a single
point. In our experience, the range is generally be condensed to the mean of the range for the
after-tax market risk premium, an approach confirmed by the courts. The reasons for choosing a
market risk premium at the higher end of the range might be founded in the higher level of
uncertainty recently observed on the capital markets and the associated risk aversion, as was the
case underlying the recommendations of the FAUB dated 10 January 2012 in reaction to the
situation on the capital markets at the time when calculating the discount rate (see IDW
Fachnachrichten: 2/201, p. 122; OLG Schleswig-Holstein, 9 March 2020, 9 W 169/15, ratio
decidendi p. 18). Arguments in favor of choosing a market risk premium at the lower end of the
range could, by the same reasoning, lie in a lower level of uncertainty on the capital markets and
waning risk aversion (see also: Großfeld/Egger/Tönnes, Recht der Unternehmensbewertung, 8th
edition, 2016, p. 250).
The Neutral Valuer, PwC set the market risk premium after personal taxes at 5.75%. As a result,
the range recommended by the FAUB has been condensed to the mean market risk premium
after personal taxes. We are of the opinion that this estimate is appropriate.
In addition, we would like to point out that, based on the total expected stock yields described
above of 7.0% to 9.0% (prior to personal taxes) recommended by the FAUB, the OLG Munich used
a total stock yield lying in a range of between 5.62% and 7.22% after personal tax as a reference,
i.e. a mean of 6.42% after personal tax (see OLG Munich, 12 May 2020, 31 Wx 361/18, No. 72
(BeckRS)). The reconciliation performed by the OLG Munich is based on the following calculation:
Source: own presentation
The total stock yield prior to personal tax of between 7.00% and 9.00% was broken down assuming
a typical distribution ratio of 50% for the market into a dividend yield and, secondly, the return
on the stock attributable to rises in the price of the stock. Dividends are burdened by the full rate
of capital gains tax plus the solidarity surcharge (26.375% in sum) and the share of the total stock
yield attributable to a rise in stock prices at half this rate. In sum, one arrives at a mean total stock
yield of 6.42% after personal tax.
Reconciliation OLG Munich
from to Mean from to Mean
Expected total return 7.00% 9.00% 8.00% 5.62% 7.22% 6.42%
Payout ratio 50.0%
thereof dividend yield 3.50% 4.50% 2.58% 3.31%
thereof price yield 3.50% 4.50% 3.04% 3.91%
Before pers. taxes After pers. taxes
- 73 -
Using the mean total stock yields stated by OLG Munich and applying the risk-free rate of 0.0%
applied by PwC in the valuation results arithmetically in a market risk premium (MRP) after
personal tax of 6.42%, i.e. at the upper end of the range currently recommended by the FAUB.
Beta factor
Within the framework of (tax-)CAPM, the beta measures the idiosyncratic risk inherent to a
particular share which cannot be avoided by diversification and is seen as a measure of the entity’s
specific risk profile (see OLG Frankfurt, 17 June 2010, 5 W 39/98, No. 46 (juris)). Any deviations in
the actual future cash flows from the expected cash flows represents a risk for the owners (see
Franken/Schulte, BewP 2012, pp. 92, 93). The beta is not a value that can be empirically measured
from historical figures, but is rather an estimate pertaining to future values (see OLG Stuttgart,
17 March 2011, 20 W 9/08, AG 2010, p. 510; OLG Frankfurt, 2 May 2011, 21 W 3/11, AG 2011,
p. 828).
According to the CAPM, it is assumed that the investors are able to spread their risks by acquiring
investments in a number of different companies (“diversification”). For this reason, a distinction is
made between the systematic risk, which cannot be reduced by diversification and the
diversifiable non-systematic risk. For this reason, the risk premiums derived using the CAPM only
contain a compensation for the systematic risk that cannot be further diversified and this is
reflected in the beta factor.
Systematic risk, which is relevant for valuation purposes can be further broken down into
operative risk, i.e. the risk inherent to operating activities, and capital structure risks. The latter is
founded on the fact that the volatility of the cash flows paid to the owners increases as leverage
rises.
In practice, the point of departure for estimating the beta are historical stock yields and this is
commonly applied by the courts. Consequently, beta is derived by linear regression of the entity’s
specific stock yield (the dependent variable) to the yield obtained from a stock index (the
independent variable). In the past, the informative value of the beta was tested using statistical
criteria (coefficient of determination, t-test). A prerequisite for an informative beta is that the stock
yields and the underlying share prices move in objective relation to changes in the economic
environment without distortion. For this reason, there is a trend towards relying on the liquidity
of the stock (in addition) to determining how suitable the calculated beta will be for a forecast.
The liquidity of a stock is measured using, for example, the spread between asking and bidding
rates or trading volume. As of today, there are no generally accepted methods and thresholds to
measure “liquid stocks” under the individual measurement concepts (for more details see
Ruthardt/Popp, AG 2020, pp. 322, 328 et seq.).
- 74 -
When assessing how up-to-date and statistically significant the beta is, it is necessary to set the
period in which the beta is calculated. A larger sample increases the accuracy of the result from a
statistical perspective. In practice, a period of five years with monthly intervals and a period of two
years with weekly intervals between returns are mainly applied (OLG Frankfurt, 30 August 2012,
21 W 14/11, No. 80 (juris); OLG Frankfurt, 20 December 2010, 5 W 51/09, No. 63 (juris)).
Generally, a shorter period, such as two years, will be more up-to-date (see OLG Stuttgart, 5 June
2013, 20 W 6/10, No. 214 (juris); OLG Frankfurt, 30 August 2012, 21 W 14/11, No. 80 (juris); LG
Frankfurt, 2 September 2010, 3-5 O 279/08, ratio decidendi p. 27). Longer periods in which
abnormal fluctuations in shares prices occur due to structural changes, such as an IPO or a
squeeze-out, are not suitable for determining the beta (see OLG Stuttgart, 4 May 2011, 20 W
11/08, No. 204 (juris)).
Original beta of OSRAM AG
For publicly listed companies like OSRAM AG, a historical beta factor can be derived directly from
capital market data. Corresponding to the time limits set for the share price, the OLG Stuttgart is
of the opinion (see the ruling dated 18 December 2009, 20 W 2/08, 4th Guiding principle and ratio
decidendi No. 239; BGH, 19 July 2010, AG 2010, pp. 629 et seq.) that the company’s inherent beta
should not be calculated using data from the period after such structural measures have been
announced. On the contrary, the period used to measure the company's beta must end on the
day on which the measures are announced (supported by OLG Karlsruhe, 13 May 2013, 12 W
77/07 (13), No. 36 (juris); LG Düsseldorf, 3 September 2014, 33 O 55/07, No. 145 (juris)).
The intention to enter into a domination and profit and loss transfer agreement was announced
on 10 February 2020. For this reason, the following chart presents the beta of OSRAM AG based
on the stock returns at weekly intervals over a two-year observation period related to the date on
which the intention to enter into a domination and profit and loss transfer agreement was
announced.
Source: Bloomberg, own calculations.
In addition to ams AG, a number of market players attempted to take over OSRAM AG by
acquiring its shares, such as Bain Capital in conjunction with the Carlyle Group and the Advent
Group. For this reason, it is possible that the development of the share price over time and the
beta of OSRAM AG was already distorted at an earlier point in time.
Beta factor of OSRAM AG as of 7 February 2020
Name Return observations Index R²
OSRAM AG 2 years weekly CDAX Index 0.17 1.32 1.22
Levered Beta
raw
Unlevered
Beta
- 75 -
The Neutral Valuer derived and analyzed the beta of OSRAM AG on the basis of data from S&P
Global Market Intelligence LLC (formerly S&P Capital IQ), a company held by S&P Global Inc., New
York City, USA (“S&P Global Market Intelligence“). PwC found that the historical share price of
OSRAM AG has decoupled from general market trends. This can be attributed to speculations on
the capital market, which cannot be ruled out, and the exercise of put options in the course the
takeover bid from ams Offer GmbH. In conclusion, it is not possible to derive an informative
undistorted beta from the days on which shares in OSRAM AG were traded. As a result, the Neutral
Valuer refrained from using the beta of OSRAM AG to derive the risk premium.
- 76 -
A prerequisite for an informative beta is that the stock yields move in objective relation to changes
in the economic environment without distortion. In the following presentation of the development
of the share price of OSRAM AG up until 7 February 2020 (last day of trading prior to
announcement of the intention to enter a domination and profit and loss transfer agreement),
indexed to 1 August 2018 and compared to the CDAX, it is apparent that the share price moves
relatively in parallel to the CDAX until November 2018.
Source: Bloomberg, ad hoc notifications from OSRAM AG and ams AG, own calculations and research.
27.11.2018
03.07.2019
11.08.2019
27.09.2019
18.10.2019
40.0
60.0
80.0
100.0
120.0
140.0
Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20
Price development of OSRAM AG shares compared to the CDAX
OSRAM AG CDAX Index
Date Description
27.11.2018Information about Bain Capital's consideration of a takeover offer to the
shareholders of OSRAM AG becomes known
03.07.2019OSRAM AG confirms receipt of a binding takeover bid from Bain Capital and the
Carlyle Group for EUR 35.00 per share
11.08.2019ams AG submits a proposal for a takeover bid to OSRAM AG at EUR 38.50 per
share
27.09.2019Increase of the takeover bid of ams AG due to the acquisition of 100 OSRAM shares
by ams AG at a purchase price of EUR 41.00 per share
18.10.2019
Announcement of the intention of a second voluntary public takeover offer on the
part of ams AG by ams Offer GmbH
Abandonment of the intention of the Advent Group and Bain Capital to submit a
public takeover bid for all outstanding shares of OSRAM AG
- 77 -
There was a sharp day-to-day rise of 14.7% in the share price on 27 November 2018 after the first
information on the review of the takeover bid received from Bain Capital/Carlyle was announced
to the shareholders of OSRAM AG. Other changes in the share prices in the ensuing period that
bear no relation to the development of the CDAX can be attributed to expectations of a takeover.
The above chart has selected examples of days on which a marked change in the share price can
be correlated to the publication of information on takeover bids. In addition, there was hardly any
change in the share price of OSRAM AG in the period from 18 October 2019 to 27 November
2019, the period starting on the date when the second public takeover bid from ams AG via ams
Offer GmbH was announced and ending upon the expiry of the offer. In conclusion, it can be
assumed that the share price of OSRAM AG was already affected by expectations of a takeover
well before 7 February 2020.
In addition, the following chart presents the development of the unlevered beta of OSRAM AG
over time in comparison to the arithmetic mean and median of the betas of the peer group (more
on this below) derived by the Neutral Valuer for the period from 23 November 2018 to 4
September 2020. The betas presented here were determined over an observation period of two
years using weekly intervals for the stock returns. The grey space indicates the upper and lower
quartiles of the betas derived for the peer group.
Source: Bloomberg, own calculations.
07.02.2020
0.30
0.60
0.90
1.20
1.50
1.80
Nov-18 Feb-19 May-19 Aug-19 Nov-19 Feb-20 May-20 Aug-20
Unle
vere
d B
eta
Development Unlevered Beta of OSRAM AG compared to the average of the
Peer Group from 23 November 2018 to 4 September 2020
Lower to upper quartile - Peer Group OSRAM AG
Mean - Peer Group Median - Peer Group
- 78 -
At the beginning of the observation period, the unlevered beta of OSRAM AG lies at a comparable
level to the average beta of the peer group companies. With an increasing number of share prices
entered into the beta calculations over the period in which the takeover bids were received, there
is an increasing discrepancy between the beta of the peer group and the beta of OSRAM AG. After
the announcement of the intention of OSRAM AG to enter into a domination and profit and loss
transfer agreement with ams AG, the discrepancy continues to grow over time. The fall in the beta
factors over the observation period illustrates how decoupled the share price of OSRAM AG was
from the general market trend.
In conclusion, due to the factors presented above, we are of the opinion that the approach
taken by the Neutral Valuer to determine the beta on the basis of the peer group is the correct
approach.
Beta factors of the peer group
In accordance with customary professional practice used to determine the operative risk of the
company being valued, the Neutral Valuer relied on a peer group of listed companies. Referring
to the betas of the peer group is also accepted by the courts (see OLG Düsseldorf, 15 August
2016, 26 W 17/13, No. 56 (juris); OLG Frankfurt, 26 January 2015, 21 W 26/13, No. 51f. (juris); OLG
Karlsruhe, 22 June 2015, 12a W 5/15, No. 60 (juris)). This also applies with regard to the inclusion
of foreign entities (see OLG Hamburg, 18 September 2015, 13 W 44/14, ratio decidendi p. 12, OLG
Düsseldorf, 4 July 2012, 26 W 8/10, No. 64 (juris); OLG Stuttgart, 19 January 2011, 20 W 2/07, No.
224; OLG Düsseldorf, 27 May 2009, 26 W 5/07, ratio decidendi p. 43).
To select the peer group, the Neutral Valuer examined the main fields of activity and major
influences on the business model of OSRAM AG. Using S&P Global Market Intelligence LLC
(“Capital IQ“) an initial long list of potential peer group companies in related industries was
selected. In the process, the Neutral Valuer relied on information in the annual report of the
OSRAM Group, information provided by the Company on its markets and competitive
environment at the level of the business units and also external market studies. In order to reduce
the long list, the Neutral Valuer identified buzzwords indicative of the product and market
structure of OSRAM AG in the descriptions of the various companies to identify potential peers.
In light of the need to source the relevant capital market data, only publicly-listed companies with
active operations were chosen. To exclude small niche providers, any companies that generated
revenue of less than EUR 250 million in the prior twelve months were struck from the list.
- 79 -
Thereafter, the Neutral Valuer reduced the long list by matching the companies to the most
important sales industries of the OSRAM Group. The remaining short list was then analyzed by
the Neutral Valuer in terms of the comparability of the various companies’ historical EBITDA
margins to those of the OSRAM Group and also the product portfolio. To further aid the selection,
analyses of trading volume in the companies’ securities, the share spreads, and information on
the shares of the peer group in free float were drawn on. In addition, the comparability of the
identified short-list of peer group companies was discussed with representatives from the OSRAM
Group in terms of their regional sales structure, value chains and the technological and qualitative
requirements placed on their products.
After the peer group was finalized, the Neutral Valuer obtained the observed betas using weekly
intervals for stock returns over an observation period of two years and also for an observation
period of five years using monthly intervals. The MSCI World and broad local stock market indexes
were used as benchmarks. The reliability of the betas determined by PwC was tested using
statistical criteria and liquidity observations (bid ask spreads, trading volume and shares in free
float).
To eliminate the effects from the financing structure of the companies in the peer group from the
specific beta factors of each company, it is generally customary professional practice to convert
the historical beta factors of indebted (levered) companies into beta factors for unlevered
companies (a process known as “unlevering”) to obtain comparative figures for the operative risk
profile of the valuation object (see OLG Frankfurt, 26 January 2015, 21 W 26/13, No. 58 (juris); OLG
Düsseldorf, 4 July 2012, 26 W 8/10, No. 63 (juris); OLG Stuttgart, 19 January 2011, 20 W 3/09, AG
2011, pp. 205, 209; OLG Frankfurt, 20 December 2010, 5 W 51/09, No. 60 (juris); OLG Stuttgart, 18
December 2009, 20 W 2/08, No. 86 (juris)).
The Neutral Valuer converted the levered betas into unlevered betas using a formula and
assuming an uncertain tax shield and the risk of default on debt (“debt beta”).
We assessed the selection of the peer group companies and the methodical approach taken by
the Neutral Valuer in the course of our audit of the beta factor. We tested the selection of peer
group companies taking account of the key operating activities and factors influencing the
OSRAM Group on the basis of the documents and information provided to us in the course of our
audit and supplemented these with our own research and analyses. We verified the plausibility of
the betas derived for the peer group by the Neutral Valuer using data obtained from Bloomberg,
the financial information service provider.
Based on our findings made in the course of our audit, the unlevered beta identified by the Neutral
Valuer of 1.25 is an appropriate indication of the systematic risk of the OSRAM Group for the
future.
- 80 -
f) Growth Factor
Within the framework of calculating the capitalized earnings value a growth factor has to be set
for the terminal value. The Neutral Valuer set the growth factor at 1.0%.
In advance, we would also like to refer to the following matter:
If growth is measured on the basis of the increase in nominal earnings indicators, basic experience
has shown that companies that retain a portion of their earnings as a source of internal finance
will, all other things being equal, report a higher net profit in the following year than those
companies that distribute their entire earnings to their shareholders.
As a source of growth, financial surpluses can be broken down into real growth drivers measured
as trends (both positive and negative) in the performance indicators in the sense of operative
growth (expansions of capacity) and merely nominal trends, i.e. due to changes in prices
(inflation-induced growth). In addition, tax effects, e.g. due to the different taxation levied on
retained earnings and profit distributions, need to be considered separately (see WPH Edition:
Bewertung und Transaktionsberatung, 2018, Chap. A, Nos. 441 et seq.).
For the purpose of deriving the terminal value, there are two models available. Under the dividend
discount model, the nominator is constituted by the distributions or dividends, which are
discounted using the cost of capital. In contrast to the capitalized earnings method, the share of
net profit that is not distributed to shareholders is not considered in the nominator. The remaining
portion is used as an internal source of finance for the company and delivers additional growth.
If – which is not readily apparent in valuation practice – only a portion of the net profit is
capitalized in the terminal phase, namely, the dividend portion, then the additional growth driven
by retaining earnings would need to be considered in the form of a relatively high growth factor.
By contrast, in the capitalized earnings method it is assumed that all net distributable earnings
will be distributed (one can see this as the value added from distributions plus the value added
from retained earnings).
- 81 -
In this regard, rolling forward the profit projected in the detailed planning phase to the terminal
phase is only possible if investments made to expand capacity are funded from retained earnings.
Assuming that such factors are in balance in the terminal phase, i.e. the company being valued
can, in a sustained fashion, service the costs of the capital needed to cover the company’s risk and
financing structure, then the future distributions originating solely from operating growth
correspond to the value added by retained earnings (sustained value added). However, it should
be considered in this regard that when using the capitalized earnings method pursuant to IDW
S1 2008 the net earnings to be discounted include not only the value of profit distributions but
also the value of retained earnings. Given that the value added from retaining earnings fully covers
the future dividend growth originating from retaining these earnings, the growth rate of
distributions reflected in the growth factor primarily represents inflation-related changes in value
that can be attributed to the specific price-induced growth rate of the company being valued.
According to the relationship published in WPH Edition: Bewertung und Transaktionsberatung,
2018, Chap. A, No. 467 the following applies:
𝑤 = (1 − 𝑞𝑒𝑓𝑓.) ∗ 𝑅𝐸𝐾𝑣𝑆𝑡 + 𝑞 ∗ 𝜋
with
𝑤 = total growth rate, 𝑞eff. = effective distribution ratio, 𝑅𝐸𝐾𝑣𝑆𝑡 = levered cost of capital before tax
and 𝜋 = company-specific growth factor.
The levered cost of capital before tax can be roughly calculated from the risk-free rate before tax
of 0.0%, a market risk premium before tax slightly above 7.0% and a levered beta of around 1.26,
resulting in 8.96%. In this case, the effective distribution ratio amounts to roughly 50.0%.
Translating this to the data of the OSRAM Group results in the following approximation of the
growth rate:
4.98% = (1 - 50%) * 8.96% + 50% * 1.0%
To this extent, an assumed growth factor of 1.0% used in the business valuation of the OSRAM
Group represents a total growth rate of 4.98% in the terminal phase.
- 82 -
We examined the growth factor chosen by the Neutral Valuer on the basis of price indexes issued
by the Federal Office of Statistics and forecasts of the consumer price index in Germany made by
bank analysts as well as the International Monetary Fund.
Ø
Change
August 2017 102.6
August 2018 104.5
August 2019 106.0
August 2020 106.0 1.1%
Ø
Change
2020
Lower boundary of estimates -0.1%
Upper boundary of estimates 1.2% 0.6%
2021
Lower boundary of estimates -0.4%
Upper boundary of estimates 2.8% 1.5%
2022
Lower boundary of estimates 0.6%
Upper boundary of estimates 2.0% 1.5%
Ø
Change
2020 0.3%
2021 1.2%
Expectation
10-year government bonds 0.8%
25-year government bonds 1.2%
German Office of Statistics -
Consumer Price Index Germany (Basis 2015 =100)
Estimates by Bank Analysts -
Change Consumer Price Index Germany
Estimates by the International Monetary Fund -
Change Consumer Price Index Germany
Inflation Expectations Inferred from the Interest Yields on Inflation
Protected German Government Bonds
- 83 -
Averaging the development of consumer prices over the past three years results in an average
annual inflation rate of 1.1%. According to a summary prepared by Bloomberg of the estimated
change in the consumer price index made by bank analysts for the years 2020 to 2022, the inflation
rate ranges between -0.4% and 2.8%. For the years 2020 and 2022, the International Monetary
Fund is forecasting an increase in consumer prices of 0.3% and 1.2% respectively. According to
the IMF, no forecasts can be made for the development of consumer prices in Germany beyond
the year 2021 on account of the uncertainties caused by the development of the corona
pandemic. The returns on long-term German government bonds, which are protected from
inflation, indicate that an inflation rate of approximately 1.2% can be expected.
However, when measuring the growth factor, the circumstances of the particular company must
also be considered. To this extent, the growth rates in the financial surpluses of different
companies can and will differ from one another by nature. According to research by
Widmann/Schieszl/Jeromin (FB 2003, pp. 800 et seq.) the average growth in profits is
approximately 45% to 50% of the average general inflation rate, independent of the economic
cycle.
This lower growth in profits has been confirmed in research by Stellbrink (“Der Restwert in der
Unternehmensbewertung”, 2005, pp. 125 et seq.). The opinion that the growth factor should be
generally lower than the inflation rate is mirrored in the prevailing opinion in the technical
literature (see Großfeld/Egger/Tönnes, Recht der Unternehmensbewertung, 8th edition, 2016,
p. 267; WPH Edition: Bewertung und Transaktionsberatung, 2018, Chap. C No. 127; for a view
contrary to the other studies, see OLG Frankfurt, 26 January 2015, 21 W 26/13, No. 63 (juris); OLG
Frankfurt, 30 August 2012, 21 W 14/11, No. 114 (juris); OLG Stuttgart, 8 July 2011, 20 W 14/08,
No. 279 et seq. (juris)). This is also partly due to the fact that an investment in a company is not
totally immune from the effect of inflation (see OLG Munich, 18 February 2014, 31 Wx 211/13, No.
26 (juris); OLG Düsseldorf, 11 April 1988, 19 W 32/86, WM 1988, pp. 1052, 1059, 31; OLG
Düsseldorf, 12 February 1992, 19 W 3/91, AG 1992, pp. 200, 204). The purpose of the growth factor
is not to offset inflation at all costs (see OLG Stuttgart, 12 September 2017, 12 W 1/17, Tz 83
(BeckRS), OLG Stuttgart, 19 March 2008, 20 W 3/ 06, AG 2008, pp, 510, 515).
In light of the above expectations for the average inflation rate, an initial indication of the growth
factor is that it lies below 1.0%.
- 84 -
In addition to the general development of the sales markets, the competitive position of the
OSRAM Group must also be considered when assessing its growth prospects. Due to the fact that
the growth factor shows the expected average increase in the future profits, the expected growth
of results within the detailed planning phase cannot be simply transferred over to the terminal
growth factor (see OLG Frankfurt, 26 January 2015, 21 W 26/13, No. 62 (juris)). With regard to the
business model of the OSRAM Group it can be stated that the products offered are regularly
exposed to quite substantial price erosion. To compensate for these effects, efficiency gains and
rising volumes must be generated in the detailed planning phase already. In addition, the
Company is exposed to increasingly fierce competition on a range of different markets.
Before this backdrop, we are of the opinion that the growth factor set by the Neutral Valuer for
the terminal phase of 1.0% is appropriate.
The growth factor set by the Neutral Valuer lies in a range that is frequently applied by the
valuation profession and regularly viewed as appropriate by the courts (see Popp/Ruthardt,
Bewertungsmethoden im Spiegel der Rechtsprechung, in: Fleischer/Hüttemann (publisher),
Rechtshandbuch Unternehmensbewertung, 2nd edition, 2019, No. 12.130).
When deriving the business value, inflation-induced gains on sale are considered when deriving
net income as a matter of course (see section 6.3 h). Alternatively, this can be modeled
mathematically – the approach taken by the Neutral Valuer – by reducing the growth factor in the
denominator (see Tschöpel/Wiese/Willershausen, WPg 2010, 349, 356; Jonas/Wieland-Blöse,
Berücksichtigung von Steuern, in: Fleischer/Hüttemann, Rechtshandbuch
Unternehmensbewertung, 2nd edition 2019, Fn. 1 to No. 17.41; Raths, Restwertermittlung in der
Unternehmensbewertung, 2018, p. 89 f.; Dierkes/Sümpelmann, BewP 2019, p. 66, 68 f; Wollny, Der
objektivierte Unternehmenswert, 3rd edition, 2018, Fn. 708 on p. 141).
From an arithmetic perspective, the Neutral Valuer has correctly derived a growth rate after
personal tax of 0.87% (wnSt) by burdening the growth rate before personal tax of 1.0 % (wvSt) with
half the rate of capital gains tax (13.19 %). Arithmetically, the following applies:
𝑤𝑛𝑆𝑡 = 0,87 % = 1,0 % ∗ (1 − 13,19 %)
- 85 -
g) Derivation of the Discount Rate
The discount rate used in the detailed planning phase and for the terminal phase has been
properly derived. We are satisfied that the financial-mathematical calculations are accurate.
As a purely precautionary measure we would like to point out that a change in individual values
for the risk-free rate, the market risk premium, the beta factor or the growth rate, any of which
might be reasonable in isolation, can in aggregate lead to an unrealistic figure for the discount
rate and therefore an unrealistic value for the fair compensation (see OLG Frankfurt, 24 November
2011, 21 W 7/11, No. 40 (juris)). Moreover, there is no need under the constitution to grant the
highest benefit for individual inputs of the capitalized earnings method, as described by the
Higher Regional Court of Stuttgart (see 17 October 2011, 20 W 7/11, No. 188 (juris)). Otherwise,
this would result in an accumulation of beneficial decisions which would no longer accurately
reflect the “actual” value (see OLG Munich, 20 March 2019, 31 Wx 185/17, No. 28 (BeckRS)).
h) Calculation of Equity Value Using the Capitalized Earnings Approach
If a specific distribution policy is in place, the distribution volume is modeled as the "value added
by distributions". If the net profit for the year is retained (or a portion thereof) without there being
any specific plans for its use, this is customarily treated as an economically sensible reinvestment
exhibiting the same rate of return as the cost of capital used within the framework of the
capitalized earnings model. The fictitious investment of these amounts at the level of the company
results in additional income in the years following their initial retention Using the assumption that
these funds are reinvested at the same rate of return (see IDW S1 2008, No. 37), the funds, which
are not actually distributed, can be modeled by a fictitious direct allocation to the shareholders
and constitute the value added by retained earnings.
- 86 -
Based on the financial planning explained in the valuation report, the equity value has been
derived as follows:
Distribution ratio and taxation of dividends
The distribution ratio needs to be determined to be used as a basis to calculate the taxation on
dividends paid to the shareholders of OSRAM AG. The Neutral Valuer has not considered any
distributions in the first years of the detailed planning phase of 2020 and 2021 which is in line
with the assumptions made by the OSRAM Group. Over the later years of the detailed planning
phase, a mean distribution ratio of 40.0% has been set based on the planned mid-range
distribution policy of the OSRAM Group. The retained earnings are required to fund planned
investments in the future and finance any changes in net working capital. As there are no legal
restrictions on such a distribution policy, no objection is made to assuming the planned
distribution policy.
The distribution ratio set by the Neutral Valuer for the terminal phase lies at 50.0%, i.e. in the
middle of the range of average market distribution patterns (see WPH Edition, Bewertung und
Transaktionsberatung, 2018, Chap. A. No. 280; which refers to an average distribution ratio of
between 40% and 60%; OLG Munich, 2 September 2019, 31 Wx 358/16, No. 99 (BeckRS) [50%];
OLG Frankfurt, 17 January 2017, 21 W 37/12, No. 87 (BeckRS)). In this approach, the distribution
patterns of the company being valued are reflected in a way that is equivalent to the distributions
of an alternative investment (see OLG Düsseldorf, 11 May 2015, 26 W 2/13, No. 47 (juris); OLG
Frankfurt, 26 January 2015, 21 W 26/13, No. 37 (juris)). The amounts that are not distributed are
considered as value added by retained earnings after deducting the retained earnings needed to
fund growth.
Overall, the distribution ratios and dividend pay-outs applied by PwC are appropriate in our
opinion. The value added by distributions has been properly derived from the sum of dividends
and adjusted to deduct capital gains tax of 25.0% plus the 5.5% solidarity surcharge.
Capital gains tax upon disposal
From the year 2009 the impact of the tax on capital gains upon disposal needs to be considered.
The effective capital gains tax depends both on the assumed duration of the holding, the
development of the business value due to the retention of earnings by the company, as well as
the alternative investment (see Wiese, WPg 2007, pp. 368, 375). The figures need to be
standardized in order to account for the timing of the sales that trigger capital gains tax and the
resulting average capital gains tax (see OLG Frankfurt, 26 January 2015, 21 W 26/13, No. 29 (juris)).
- 87 -
In valuation practice, and acknowledged by the courts, a standardized effective capital gains tax
of 12.5% plus the solidarity surcharge (13.1875% in total) is assumed (see Popp, Berücksichtigung
von Steuern, in: Peemöller (publisher); Praxishandbuch der Unternehmensbewertung, 7th edition,
2019, p. 1425, 1436, etc.; OLG Düsseldorf, 28 October 2019, 26 W 3/17, No. 56 (BeckRS); OLG
Munich, 26 June 2018, 312 Wx 382/15, No. 90 (BeckRS); OLG Frankfurt, 5 February 2016, 21 W
69/14, No. 85 (BeckRS)). Consequently, the Neutral Valuer burdened the retained earnings in the
terminal value at an effective tax rate of 13.1875% instead of the nominal tax rate of 25% plus the
solidarity surcharge.
Moreover, the inflation-induced gains on sale need to be considered when deriving the net
proceeds (see Popp, Der Konzern 2019, p. 149 et seq.; Ruthardt/Popp, AG 2019, p. 196, 200). This
is based on the fact that gains on sale are subject to tax. On grounds of materiality, they are
generally only considered in the terminal value. From a purely mathematical perspective, the
business value rises year for year in the terminal phase at the rate of the company’s specific
inflation rate; this also applies assuming a fictitious distribution of all projected financial surpluses.
If it is typically assumed that a shareholder will not hold the shares indefinitely, the inflation-
induced gains in the price of the share will be realized after the typified duration of the
shareholding and then be subject to the effective capital gains tax plus solidarity surcharge (for
more examples see WPH Edition: Bewertung und Transaktionsberatung, 2018, Chap. A No. 453 et
seq.). Alternatively, this can be modeled mathematically by reducing the growth factor in the
denominator (see Tschöpel/Wiese/Willershausen, WPg 2010, 349, 356; Jonas/Wieland-Blöse,
Berücksichtigung von Steuern, in: Fleischer/Hüttemann, Rechtshandbuch
Unternehmensbewertung, 2nd edition 2019, Fn. 1 to No. 17.41; Raths, Restwertermittlung in der
Unternehmensbewertung, 2018, p. 89 f.; Dierkes/Sümpelmann, BewP 2019, p. 66, 68 f; Wollny, Der
objektivierte Unternehmenswert, 3rd edition, 2018, Fn. 708 on p. 141).
- 88 -
Within the framework of tax-CAPM, the market risk premium is derived from the total market
returns on shares. This is derived in turn from the long-term nominal (i.e. affected by inflation)
increase in stock indexes. The annual change in the index consists of the returns on the stocks
obtained from dividend yields and the rise in the stock prices of the shares included in the index.
When deriving the after-tax return on shares from the pre-tax return on shares (see WPH Edition:
Bewertung und Transaktionsberatung, 2018, Chapter A No. 396) the amount attributable to the
dividend yield is subject to the nominal rate of capital gains tax. The difference between the total
return on the stock and the dividend yield can be attributed to changes in the price of the stock.
The developments of stock prices historically observed on the market therefore constitute
nominal indicators. To this extent, inflation-induced rises in the stock price are already priced into
the indicator (for an analysis of real returns after adjusting for inflation see Castedello et al., WPg
2018, pp. 806, 812 et seq.). If the return on the stock attributable to rising stock prices is now
reduced by the effective capital gains tax when calculating the market risk premium after income
tax within the framework of tax-CAPM, the inflation-induced changes in the share prices or capital
gains will be implicitly included when calculating the discount rate. As the reconciliation of stock
returns before tax to after tax is performed using tax-CAPM, the specific way the market risk
premium is derived (either based on historical figures or future forecasts) is not relevant, as all
stock returns entered into the tax-CAPM model are subject to tax in their entirety (see Popp, Der
Konzern 2019, p. 149, 154; Ruthardt/Popp, AG 2019, p. 196, 200 f.). To ensure equivalence between
the company being valued and an alternative investment for tax purposes, and in terms of
availability, the effective tax on gains on sale due to inflation alone must be included in the
measurement of the equity value.
- 89 -
The practice of considering the effective capital gains tax on inflation-induced gains in value is
common in professional valuation practice and was confirmed as the proper treatment or at least
not objected in court cases brought under the SpruchG (see OLG Bremen, 15 May 2020, 2 W
47/19; OLG Schleswig, 9 March 2020, 9 W 169/15; OLG Munich , 6 August 2019, 31 Wx 340/17;
OLG Stuttgart, 26 June 2019 20 W 27/18; OLG Munich, 13 November 2018, 31 Wx 372/15; OLG
Hamburg, 8 October 2018, 13 W 20/16; OLG Hamburg, 30 June 2016, 13 W 75/14; LG Stuttgart,
1 October 2019, 31 O 36/16; LG Hamburg, 26 September 2019, 412 HKO 156/16; LG Stuttgart, 13
August 2019, 31 O 50/15; LG Frankfurt, 25 April 2019, 3-05 O 45/16; LG Bremen, 7 February 2019,
11 O 231/15; LG Frankfurt, 4 February 2019, 3-05 O 68/17; LG Stuttgart, 18 November 2018, 31 O
130/15; LG Stuttgart, 17 September 2018, 31 O 1/15; LG Gera, 25 June 2018, 11 HK O 55/16; LG
Stuttgart, 3 April 2018, 31 O 138/15; LG Düsseldorf, 15 January 2018, 31 O 5/13; LG Koblenz, 7
August 2017, 4 HK O 79/14; LG Munich I, 30 June 2017, 5 HK 13182/15; LG Stuttgart, 12 May 2017,
31 O 61/13; LG Munich I, 28 April 2017, 5 HKO 26513/11; LG Munich I, 25 April 2016, 5 HK
20672/14; LG Hamburg, 15 October 2015, 403 HKO 42/14; LG Koblenz, 10 September 2015, 4 HKO
166/12; LG Munich I, 21 August 2015, 5 HK O 1913/14; LG Kiel, 21 April 2015,16 O 75/12; LG
Hamburg, 26 September 2014, 403 HKO 19/13; for a contrary view: LG Munich I, 26 July 2019, 5
HK O 13831/17; LG Munich I, 16 April 2019, 5 HK O 14963/17; LG Munich I, 29 August 2018, 5 HK
16585/15, LG Dortmund, 26 August 2019, 20 O 4/12).
The Neutral Valuer PwC has correctly deducted capital gains tax when deriving the growth factor
for the terminal phase.
Discounting of net cash flows
We assessed the discounting of the projected dividend distributions on the one hand and the
fictitious direct allocation of the value added by retained earnings on the other.
In order to discount the annual dividend distributions, the Neutral Valuer assumed that the
distributions will be made at year end. Consequently, the distributions were discounted in the
valuation model from the end of the respective fiscal year to the technical valuation date of 30
September 2019 and thereafter compounded to the proper valuation date.
We are of the opinion that the two phase model has been applied correctly. After checking the
accuracy of the mathematical calculation of the equity value using the capitalized earnings
method, we are satisfied that the results are correct.
- 90 -
6.4. Separately-Valued Assets
The Neutral Valuer has identified a building in Traunreut and a property in Berlin as non-operating
assets and valued them separately. Based on external appraisals, the Neutral Valuer considered a
value of EUR 17.5 million and EUR 33.3 million for the properties in Traunreut and Berlin, taking
into account tax effects.
Furthermore, the Neutral Valuer has considered a number of equity investments as separately-
valued assets. These investments are consolidated using the equity method pursuant to IFRS 9
and are therefore not fully consolidated. The Neutral Valuer has recognized a total amount of
EUR 81.0 million for these investments.
In addition, the Neutral Valuer considered the shares held in the two venture capital funds,
Unternehmertum VC Fonds II GmbH & Co. KG, Garching (“UVC Fonds II“), and Partech Partners
S.A.S., Paris, France (“Partech Entrepreneur III“), valued at a total value of EUR 5.1 million as
separately-valued assets.
In addition, the income arising from the sale and liquidation of equity investments generated in
fiscal year 2020 was considered at a sum of EUR 10.2 million. This includes an amount of EUR 8.0
million from the sale of Siteco GmbH.
In sum, separately-valued assets come to a total of EUR 147.2 million.
We verified the derivation of the separately-valued assets and are of the opinion that their values
are appropriate.
Other separately-valued assets
According to the managing board of OSRAM AG and based on the findings of our audit, we are
of the opinion that there are no indications of any other non-operating assets.
Capital gains tax on separately-valued assets
If it is assumed that the proceeds from the (fictitious) sale of non-operating assets or any non-
essential liquidity are distributed to the owners, this normally entails consideration of the
(standardized) personal income taxes of the shareholders in the valuation model (see
Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der Rechtsprechung, in:
Fleischer/Hüttemann, Rechtshandbuch Unternehmensbewertung, 2nd edition. 2019, No. 12.156;
Popp, Der Konzern 2020, p. 177, 179 with additional comments).
- 91 -
The Neutral Valuer has opted not to burden separately-valued assets with the shareholders’
personal income tax. Our audit opinion remains unaffected.
6.5. Business Value
Based on the presentations made in the valuation report, the business value of OSRAM AG as at
the valuation date of 3 November 2020, derived from its equity value and consideration of
separately-valued assets, amounts to approximately EUR 4,205 million. This corresponds to an
value per share of EUR 44.65.
We have assessed the calculation of the value per share. It has been derived correctly.
6.6. Price on the Stock Exchange
Calculation of the average three-month share price
In its ruling dated 19 July 2010 (II ZB 18/09, AG 2010, p. 629 ff., “Stollwerk”) the Federal Court of
Justice ruled that the market price of the share on the stock exchange that is used to derive a fair
cash compensation must be measured on the average market value over a three-month period
prior to announcement of the structural measures.
In its deliberations, the Federal Court of Justice states that if the share price is taken from the
period after the structural measures are announced and this “... is included in the reference period,
the share price no longer reflects, as required, the price which the shareholder could have
expected without the intervention of the majority shareholder, who is duty bound to pay
compensation, or without the structural measure having occurred. Thus the share price does not
reflect the business value expected by the market on the basis of the supply and demand
mechanism but the price which can be obtained precisely because of the structural measure.
[...] However, such market demand has nothing to do with the fair value of the share which the
minority shareholder should receive as compensation for losing his status as a shareholder, in
other words to recompense him for the position he would be in had the structural measure not
occurred (BVerfGE 100, 289, 305; BVerfG, ZIP 2007, 175 Rn. 16).” The selection of a reference period
also serves to prevent any conscious manipulation. Abuse by either side should be ruled out. In
the opinion of the Federal Court of Justice, the minority shareholders are protected from
manipulation by the majority shareholder choosing a particularly favorable date, by stating that
the fair compensation may never be lower than the share of the minority shareholder in the
business value.
- 92 -
This interpretation is also reflected in Sec. 5 (1) of the bidding regulations for the WpÜG-AngebV
which determines that the offered amount in the case of a takeover bid must at least correspond
to the volume-weighted average market price of the shares in the target for the three months
prior to the decision to make a bid.
On 10 February 2020 ams AG announced its “firm intention” to enter into a domination and profit
and loss transfer agreement with its wholly-owned subsidiary, ams Offer GmbH and OSRAM AG.
It should be noted that, in light of the necessary 75% majority in the voting rights at the general
meeting it is not necessary, based on a ruling from the LG Munich I for the corporate agreement
to be actually executed (see LG Munich I, 28 November 2019, 5 HK O 6321/14, ratio decidendi p.
47).
Corresponding to the approach described on the internet site of the BaFin, the Neutral Valuer
referred to the three month period ending on the last day (of trading) prior to the public
announcement of the intention to enter into a domination and profit and loss transfer agreement
to calculate the price of the stock on the exchange. As a result, the three-month reference period
ends on 9 February 2020, and, considering that this falls on a Sunday, on the last day of trading
on Friday, 7 February 2020. We believe that this approach is appropriate.
Averaging
According to Sec. 5 (1) WpÜG-AngebV, the volume-weighted average price of the stock is to be
based on the price of the stock determined by the BaFin. According to the letter from BaFin dated
6 March 2020, the applicable minimum price for shares in OSRAM AG on the cut-off date of 9
February 2020 (inclusive) calculated by the BaFin in accordance with Sec. 31 (1) and (7) WpÜG in
conjunction with Sec. 5 WpÜG-AngebV, comes to
EUR 42.20.
For comparative purposes we determined the trading volume-weighted share price using market
data from Bloomberg. The resulting share price matches the calculations performed by the BaFin.
As a result, the three-month average share price of EUR 42.20 per share lies below the business
value of OSRAM AG determined using the capitalized earnings method of EUR 44.65 per share.
- 93 -
The following summary presents the development of the share price and the trading volume of
shares in OSRAM AG until the end of our audit work. The three-month period prior to
announcement (on 7 February 2020) of the intention to enter into a domination and profit and
loss transfer agreement is highlighted yellow. Moreover, the three-month average share price as
at 9 February 2020 of EUR 42.20 is also presented.
Source: Bloomberg, own calculations.
Longer period and extrapolation of the share price
According to the Federal Court of Justice, the share price must be “extrapolated” to the valuation
date if a “longer period” lies between the date on which the announcement is made and the date
of the general meeting if there are “general or sector-specific” trends on the exchange that
indicate that an adjustment is necessary.
In its Stollwerck ruling, the Federal Court of Justice assumed that a “longer period” involved seven-
and-a-half months between announcement of the structural measure and the general meeting
passing the resolution on it. In the professional literature a period of up to six months is not
considered to constitute a “longer period”. In some cases a period of up to seven-and-a-half
months – i.e. exactly the same duration as in the Stollwerck ruling of the Federal Court of Justice –
is not considered to qualify as a “longer period” (for references to the literature, see
Popp/Ruthardt, WPg 2017, pp. 1222, 1223).
0
2,500,000
5,000,000
7,500,000
10,000,000
12,500,000
15,000,000
17,500,000
20,000,000
0.0
10.0
20.0
30.0
40.0
50.0
60.0
01.09.2018 01.03.2019 01.09.2019 01.03.2020 01.09.2020
Tra
din
g v
olu
me i
n p
iece
s
Share
pri
ce in
EU
R
Price and trading volume of the OSRAM AG share
Trading volume Share price of OSRAM AG Average share price
- 94 -
The term “longer period” is interpreted restrictively by the courts and such an extrapolation is
reserved for “unusual” cases. A period of up to six months between announcement of the
corporate measure and the date of the general meeting is deemed to be “normal” or “customary”
as generally six months are required, in normal times, for the business valuation, its audit and the
preparatory work for the general meeting (see, for example, OLG Stuttgart, 24 July 2013, 20 W
2/12, No. 174 (juris)). To this extent, there are only isolated cases where the share price has been
extrapolated for the purposes of determining a fair compensation. However, there is no apparent
uniformity in the interpretation of a “longer period” or the methodology to be used to extrapolate
the share price (for details on “longer period” and alternative extrapolation methods, see
Popp/Ruthardt, WPg 2017, pp. 1222 ff.).
LG Munich I has recognized a period of roughly eight-and-a-half months as a “longer period” (see
LG Munich I 30 November 2016, 5 HK 22066/02, ratio decidendi pp. 55 et seq.). In its ruling from
the year 2019, LG Frankfurt a.M. confirmed that a period of seven months (to be precise, seven
months and eight days) constituted a “longer period” (see LG Frankfurt a.M., 4 February 2019,
3-05 O 68/17). The OLG Frankfurt a.M. confirmed this estimation and nevertheless refrained from
extrapolation (see 27 August 2020, 21 W 59/19, resolution text p. 12).
There will be a period of eight-and-a-half months between announcement of the intention to
enter into the Domination and Profit and Loss Transfer Agreement and the date of the general
meeting on 3 November.
As a precautionary measure, we “extrapolated the exchange price” of OSRAM AG to the end of
our audit work. In conclusion, no extrapolation relevant to the compensation was presented as at
the end of our audit work.
6.7. Comparative Valuations
In addition to capital value-based valuations, business valuation practice also uses multiples of
various indicators to estimate preliminary business values, set a range of values or to test
plausibility. Like the capitalized earnings method, multiples-based valuations are also based on
earnings. However, enterprise value in this case is determined by multiplying earnings or the
assets base by an indicator. The multiples method is based on a comparative valuation in the
sense that the suitable multiple is derived from capital market data of listed peer group companies
or transactions and then applied to the company to be valued.
Such multiples-based valuations only constitute a simplified valuation but can be used to test the
plausibility of other methods (see IDW S1 2008, No 143).
- 95 -
We assessed the comparative valuations performed by PwC on the basis of data obtained from
Bloomberg. Our analysis did not reveal any indications that the fundamental business value
derived using the capitalized earnings method is too low.
6.8. Sensitivity Analysis
As a precaution, we draw attention to the fact that the following sensitivity analyses and the
resulting values are only provided for the purpose of informing minority shareholders and the
regional court commissioning this report. The resulting values should not be interpreted as an
indication of a fair compensation and do not therefore contradict our audit opinion.
In the following table, we have varied the unlevered beta factor within a range of 1.15 to 1.35 and
the market risk premium after personal taxes within a range of 4.75 % and 6.75 %.
6.9. Particular Difficulties in the Valuation
On the basis of our knowledge of the relevant parts of the joint report, the information provided
to us, our meetings with the managing board of OSRAM AG, the management of ams Offer GmbH,
our meetings with the representatives of the audit firm engaged by the two parties to the
corporate agreement to assist with determining the business value, our review of the planning
projections underlying the calculation of the business value, and other documents, we have come
to the conclusion that no special difficulties arose during the business valuation of OSRAM AG in
the sense of Sec. 293e (1) sent. 3 No. 3 AktG.
Sensitivity analysis
Value per share in EUR Beta factor
0 1.15 1.20 1.25 1.30 1.35
Market risk premium 4.75% 65.54 61.78 58.37 55.27 52.43
5.25% 57.03 53.74 50.76 48.04 45.54
5.75% 50.22 47.30 44.65 42.23 40.00
6.25% 44.65 42.02 39.64 37.45 35.45
6.75% 40.00 37.62 35.45 33.47 31.64
- 96 -
7. Calculation of the Fair Compensation and Guaranteed Dividend
7.1. Calculation of the Fair Compensation pursuant to Sec. 305 AktG
The figures taken to derive the proposed fair compensation are presented in detail in the valuation
report attached to the joint report.
Based on a business value of approximately EUR 4,205 million, the Neutral Valuer derived a value
per share of EUR 44.65 after rounding.
The volume-weighted average share price over the relevant three-month period ending on
9 February 2020 comes to EUR 42.20.
In light of the above, the parties to the Agreement have set the fair compensation at
EUR 44.65
per share.
In our opinion, the compensation is fair.
7.2. Calculation of the Guaranteed Dividend pursuant to Sec. 304 AktG
In terms of the amount of the guaranteed dividend, Sec. 304 (2) sentence 1 AktG states that the
guaranteed dividend must at least ensure an annual payment that is commensurate to the
prospective average share in profits allocable to the individual share on the basis of past earnings
and its future earnings prospects, after taking account of appropriate depreciation, amortization
and impairments but disregarding other revenue reserves. This law ensures that minority
shareholders receive a guaranteed dividend that corresponds to the dividends that they would
have received without the corporate agreement (see BGH, 21 July 2003, II ZB 17/01, BGHZ 156,
pp. 57, 61; OLG Munich, 17 July 2007, 31 Wx 60/06, No. 48 (juris)).
The guaranteed dividend is customarily derived by converting the equity value into an annuity
(see Popp/Ruthardt, § 12 Bewertungsmethoden im Spiegel der Rechtsprechung, in:
Fleischer/Hüttemann, Rechtshandbuch Unternehmensbewertung 2nd edition 2020, No. 12.201;
Veil/Preissner, in Spindler/Stilz, Aktiengesetz, 4th edition 2019, § 304 AktG No. 54; BGH, 12 January
2016, II ZB 25/14, AG 2016, p. 359; OLG Düsseldorf, 12 November 2015, 26 W 9/14, No. 65
(BeckRS); OLG Frankfurt a.M., 28 March 2014, 21 W 15/11, No. 230 (juris)).
- 97 -
The Neutral Valuer has derived the guaranteed dividend by converting the business value of the
OSRAM Group on 30 September 2020, i.e. including the separately-valued assets, into an annuity.
We are of the opinion that this approach is appropriate.
Rate of return on the annuity
Economically, the rate of return on the annuity is an expression of the return from an alternative
investment that is equivalent to the guaranteed dividend. To this extent, it should match the risk
profile of the guaranteed dividend. In professional practice two different approaches are used to
derive the rate of return on the annuity: the mean value approach or the credit-spread approach.
In the mean value approach the risk-free rate is increased by adding half of the risk premium used
in the capitalized earnings method whereas, in the credit-spread approach, the risk-free rate is
increased by adding a premium for the parent company’s risk of default.
If a corporate agreement contains a clause that foresees revival of the offer to pay compensation,
the credit-spread approach is used. By contrast, if there is no such clause for the revival of the
offer to pay compensation, the mean value approach is the approach taken (see LG Munich I,
31 July 2015, 5 HKO 16371/13, No. 391 ff. (juris); LG Berlin, 23 April 2013, 102 O 134/06; and for
the use of the credit spread approach in the case of revival see OLG Düsseldorf, 25 May 2016,
26 W 2/15, No. 77 (BeckRS)).
The Neutral Valuer applied the mean value approach to derive the rate of return on the annuity.
This approach is the proper approach in this case.
The interest rate used to calculate the annuity is not to be reduced by a growth factor (see OLG
Düsseldorf, 25 May 2016, 26 W 2/15, No. 78 (BeckRS) etc.; OLG Karlsruhe, 13 May 2013,
12 W 77/08 (13), No. 106 (juris); OLG Munich, 17 July 2007, 31 Wx 60/06, No. 52 (juris)).
Effects of capital gains tax
When setting the guaranteed dividend, the Neutral Valuer has correctly considered that cash flows
from a guaranteed dividend should be treated as dividends and are therefore subjected to capital
gains tax of 25.0% plus the solidarity surcharge.
For this purpose, the after-tax value was annuitized using an after-tax interest rate. After that the
after-tax annual rent was translated to the pre-tax rent by adding the typified tax burden (see OLG
Stuttgart, 5 June 2013, 20 W 6/10, No. 258 (juris), LG Stuttgart, 5 November 2012, 31 O 55/08,
ratio decidendi p. 62).
- 98 -
Calculation of the guaranteed dividend
The point of departure for deriving the guaranteed dividend is the value per share derived from
the business value as at 30 September 2020 of EUR 44.32.
The appropriate guaranteed dividend was calculated as follows:
In a first step, the annual rent after income tax (“ESt”) is to be determined, which results from the
interest on the value per share (EUR 1.65). Then the value is to be determined which is necessary
before ESt in order to receive a rent inflow after ESt in this amount. The necessary compensation
payment before ESt is thus EUR 2.24.
Modification of the annual compensation payment in accordance with the ruling from the
Federal Court of Justice
In its Ytong ruling, the Federal Court of Justice ruled that the guaranteed dividend must amount
to the prospective distributable gross earnings per share less the german corporate income tax
to be paid by the company at the applicable tax rate. Consequently, adjustments to the corporate
income tax rate could lead to an adjustment of the guaranteed dividend as, in the opinion of the
Federal Court of Justice, the “corporate income tax cannot be influenced by the company itself,
but merely represents an outflow of the profit it has generated” (BGH. 21 July 2003, II ZB 17/01,
WM 2003, p. 1859, 1859 ff.; for a critical view: Popp, WPg 2008, pp. 23, 25).
EUR return EUR return
Business Value per share 30.09.2020 44.32 44.32
Riskfree rate after income tax 0.00%
Half risk surcharge 3.724%
Interest rate after income tax 3.724%
Annuity rate after income tax 3.724%
Perpetuity before income tax 2.24 5.057%
Income tax (26.375%) -0.59
Perpetuity after income tax 1.65 3.724% 1.65 3.724%
Compensation payments (before income tax) 2.24
OSRAM AG stock portfolio
- 99 -
In order to consider possible changes in the corporate income tax burden on the amount of the
guaranteed dividend in the sense of the ruling of the Federal Court of Justice from 21 July 2003,
whereby a (fixed) guaranteed dividend in the sense of Sec. 304 (1) sentence 1 AktG and Sec. 304
(2) sentence 1 AktG must equate with the prospective average distributable share of gross profit
allocable to the share less the associated corporate income tax (upon distribution) at the
applicable tax rate, it is necessary to fix the tax base for measuring corporate income tax and the
solidarity surcharge (see OLG Frankfurt, 26 January 2015, 21 W 26/13, No. 76 (juris); OLG Stuttgart,
5 June 2013, 20 W 6/10, No. 254 (juris); BayObLG, 28 October 2005, 3Z BR 071/00, AG 2006, pp.
41, 45, LG Munich I, 31 July 2015, 5 HKO 16371, No. 403 (juris)).
The calculation of the guaranteed dividend is made by deducting the current corporate income
tax rate plus solidarity surcharge (EUR 0.33) from the pre-tax guaranteed dividend derived from
the equity value (EUR 2.57).
On this basis, the fair guaranteed dividend pursuant to Sec. 304 AktG amounts to EUR 2.57 per
no-par value share (pre-tax earnings per share) less the amount of corporate income tax to be
transferred to the tax office by OSRAM AG. This amount is to be calculated from the share in the
profit contained in the pre-tax earnings per share of EUR 2.08 arising from profits of OSRAM AG
that are subject to German corporate income tax taking account of the applicable corporate
income tax rate for the year concerned. The corporate income tax rate plus solidarity surcharge
applying on the date on which the contract will be concluded amounts to 15.825%. This results in
a corporate income tax deduction of EUR 0.33 from the share in profit that is subject to German
corporate income tax.
Assuming that there is no change in the corporate income tax rate of 15.0 % and a solidarity
surcharge of 5.5 % the guaranteed dividend per no-par value share amounts to EUR 2.24.
Gross
compensation./. KSt+SolZ
Compensation
payment
EUR EUR EUR
Pro rata compensation from profits subject
to german corporate income tax and
solidarity surcharge 2.08 0.33 1.75
Pro rata compensation from profits not
subject to german corporate income tax
and solidarity surcharge 0.49 0.00 0.49
Total compensation 2.57 0.33 2.24
SolZ = Solidarity surcharge
KSt = Corporate income tax
- 100 -
8. Concluding Declaration of the Fairness of the Compensation
and Guaranteed Dividend
“Based on our findings, the compensation to be paid to the minority shareholders of OSRAM Licht
AG, Munich, pursuant to Sec. 305 AktG as a consequence of the company entering into a
domination and profit and loss transfer agreement with ams Offer GmbH, Ismaning, of EUR 44.65
per no-par value registered share is fair.
The fair guaranteed dividend per share pursuant to Sec. 304 AktG amounts to EUR 2.57 (share in
pre-tax earnings per share) less the amount of German corporate income tax to be transferred to
the tax office by OSRAM AG. This amount is to be calculated from the share in the profit contained
in the pre-tax profits per share of EUR 2.08 arising from profits of OSRAM AG that are subject to
corporate income tax taking account the applicable corporate income tax rate for the year
concerned. Applying the corporate income tax rate of 15.825% (including solidarity surcharge) on
the date on which the corporate agreement is entered into, the deduction comes to EUR 0.33 and
therefore results in a guaranteed dividend of EUR 2.24 per share.”
Stuttgart, 23 September 2020
Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft
Dr. Matthias Popp Dr. Frederik Ruthardt
Wirtschaftsprüfer Wirtschaftsprüfer
[German Public Auditor] [German Public Auditor]
Exhibit 1
[Translator's notes are in square brackets]
General Engagement Termsfor
Wirtschaftsprüfer and Wirtschaftsprüfungsgesellschaften[German Public Auditors and Public Audit Firms]
as of January 1, 2017
1. Scope of application
(1) These engagement terms apply to contracts between German PublicAuditors (Wirtschaftsprüfer) or German Public Audit Firms(Wirtschaftsprüfungsgesellschaften) – hereinafter collectively referred to as”German Public Auditors” – and their engaging parties for assuranceservices, tax advisory services, advice on business matters and otherengagements except as otherwise agreed in writing or prescribed by amandatory rule.
(2) Third parties may derive claims from contracts between German PublicAuditors and engaging parties only when this is expressly agreed or resultsfrom mandatory rules prescribed by law. In relation to such claims, theseengagement terms also apply to these third parties.
2. Scope and execution of the engagement
(1) Object of the engagement is the agreed service – not a particulareconomic result. The engagement will be performed in accordance with theGerman Principles of Proper Professional Conduct (Grundsätze ord-nungsmäßiger Berufsausübung). The German Public Auditor does notassume any management functions in connection with his services. TheGerman Public Auditor is not responsible for the use or implementation ofthe results of his services. The German Public Auditor is entitled to makeuse of competent persons to conduct the engagement.
(2) Except for assurance engagements (betriebswirtschaftliche Prüfungen),the consideration of foreign law requires an express written agreement.
(3) If circumstances or the legal situation change subsequent to the releaseof the final professional statement, the German Public Auditor is not obli-gated to refer the engaging party to changes or any consequences result-ing therefrom.
3. The obligations of the engaging party to cooperate
(1) The engaging party shall ensure that all documents and further infor-mation necessary for the performance of the engagement are provided tothe German Public Auditor on a timely basis, and that he is informed of allevents and circumstances that may be of significance to the performanceof the engagement. This also applies to those documents and furtherinformation, events and circumstances that first become known during theGerman Public Auditor’s work. The engaging party will also designatesuitable persons to provide information.
(2) Upon the request of the German Public Auditor, the engaging partyshall confirm the completeness of the documents and further informationprovided as well as the explanations and statements, in a written statementdrafted by the German Public Auditor.
4. Ensuring independence
(1) The engaging party shall refrain from anything that endangers theindependence of the German Public Auditor’s staff. This applies throughoutthe term of the engagement, and in particular to offers of employment or toassume an executive or non-executive role, and to offers to accept en-gagements on their own behalf.
(2) Were the performance of the engagement to impair the independenceof the German Public Auditor, of related firms, firms within his network, orsuch firms associated with him, to which the independence requirementsapply in the same way as to the German Public Auditor in other engage-ment relationships, the German Public Auditor is entitled to terminate theengagement for good cause.
5. Reporting and oral information
To the extent that the German Public Auditor is required to present resultsin writing as part of the work in executing the engagement, only that writtenwork is authoritative. Drafts are non-binding. Except as otherwise agreed,oral statements and explanations by the German Public Auditor are bindingonly when they are confirmed in writing. Statements and information of theGerman Public Auditor outside of the engagement are always non-binding.
6. Distribution of a German Public Auditor‘s professional statement
(1) The distribution to a third party of professional statements of the Ger-man Public Auditor (results of work or extracts of the results of work wheth-er in draft or in a final version) or information about the German PublicAuditor acting for the engaging party requires the German Public Auditor’swritten consent, unless the engaging party is obligated to distribute orinform due to law or a regulatory requirement.
(2) The use by the engaging party for promotional purposes of the GermanPublic Auditor’s professional statements and of information about theGerman Public Auditor acting for the engaging party is prohibited.
7. Deficiency rectification
(1) In case there are any deficiencies, the engaging party is entitled tospecific subsequent performance by the German Public Auditor. Theengaging party may reduce the fees or cancel the contract for failure ofsuch subsequent performance, for subsequent non-performance or unjusti-fied refusal to perform subsequently, or for unconscionability or impossibil-ity of subsequent performance. If the engagement was not commissionedby a consumer, the engaging party may only cancel the contract due to adeficiency if the service rendered is not relevant to him due to failure ofsubsequent performance, to subsequent non-performance, to unconscion-ability or impossibility of subsequent performance. No. 9 applies to theextent that further claims for damages exist.
(2) The engaging party must assert a claim for the rectification of deficien-cies in writing (Textform) [Translators Note: The German term “Textform”means in written form, but without requiring a signature] without delay.Claims pursuant to paragraph 1 not arising from an intentional act expireafter one year subsequent to the commencement of the time limit under thestatute of limitations.
(3) Apparent deficiencies, such as clerical errors, arithmetical errors anddeficiencies associated with technicalities contained in a German PublicAuditor’s professional statement (long-form reports, expert opinions etc.)may be corrected – also versus third parties – by the German PublicAuditor at any time. Misstatements which may call into question the resultscontained in a German Public Auditor’s professional statement entitle theGerman Public Auditor to withdraw such statement – also versus thirdparties. In such cases the German Public Auditor should first hear theengaging party, if practicable.
8. Confidentiality towards third parties, and data protection
(1) Pursuant to the law (§ [Article] 323 Abs 1 [paragraph 1] HGB [GermanCommercial Code: Handelsgesetzbuch], § 43 WPO [German Law regulat-ing the Profession of Wirtschaftsprüfer: Wirtschaftsprüferordnung], § 203StGB [German Criminal Code: Strafgesetzbuch]) the German PublicAuditor is obligated to maintain confidentiality regarding facts and circum-stances confided to him or of which he becomes aware in the course of hisprofessional work, unless the engaging party releases him from this confi-dentiality obligation.
(2) When processing personal data, the German Public Auditor will observenational and European legal provisions on data protection.
9. Liability
(1) For legally required services by German Public Auditors, in particularaudits, the respective legal limitations of liability, in particular the limitationof liability pursuant to § 323 Abs. 2 HGB, apply.
(2) Insofar neither a statutory limitation of liability is applicable, nor anindividual contractual limitation of liability exists, the liability of the GermanPublic Auditor for claims for damages of any other kind, except for dam-ages resulting from injury to life, body or health as well as for damages thatconstitute a duty of replacement by a producer pursuant to § 1 ProdHaftG[German Product Liability Act: Produkthaftungsgesetz], for an individualcase of damages caused by negligence is limited to € 4 million pursuant to§ 54 a Abs. 1 Nr. 2 WPO.
(3) The German Public Auditor is entitled to invoke demurs and defensesbased on the contractual relationship with the engaging party also towardsthird parties.
Lizensiert für/Licensed to: Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft |4385435
Exhibit 2
(4) When multiple claimants assert a claim for damages arising from anexisting contractual relationship with the German Public Auditor due to theGerman Public Auditor’s negligent breach of duty, the maximum amountstipulated in paragraph 2 applies to the respective claims of all claimantscollectively.
(5) An individual case of damages within the meaning of paragraph 2 alsoexists in relation to a uniform damage arising from a number of breaches ofduty. The individual case of damages encompasses all consequences froma breach of duty regardless of whether the damages occurred in one yearor in a number of successive years. In this case, multiple acts or omissionsbased on the same source of error or on a source of error of an equivalentnature are deemed to be a single breach of duty if the matters in questionare legally or economically connected to one another. In this event theclaim against the German Public Auditor is limited to € 5 million. Thelimitation to the fivefold of the minimum amount insured does not apply tocompulsory audits required by law.
(6) A claim for damages expires if a suit is not filed within six monthssubsequent to the written refusal of acceptance of the indemnity and theengaging party has been informed of this consequence. This does notapply to claims for damages resulting from scienter, a culpable injury to life,body or health as well as for damages that constitute a liability for replace-ment by a producer pursuant to § 1 ProdHaftG. The right to invoke a pleaof the statute of limitations remains unaffected.
10. Supplementary provisions for audit engagements
(1) If the engaging party subsequently amends the financial statements ormanagement report audited by a German Public Auditor and accompaniedby an auditor's report, he may no longer use this auditor’s report.
If the German Public Auditor has not issued an auditor's report, a referenceto the audit conducted by the German Public Auditor in the managementreport or any other public reference is permitted only with the GermanPublic Auditor’s written consent and with a wording authorized by him.
(2) lf the German Public Auditor revokes the auditor's report, it may nolonger be used. lf the engaging party has already made use of the auditor'sreport, then upon the request of the German Public Auditor he must givenotification of the revocation.
(3) The engaging party has a right to five official copies of the report.Additional official copies will be charged separately.
11. Supplementary provisions for assistance in tax matters
(1) When advising on an individual tax issue as well as when providingongoing tax advice, the German Public Auditor is entitled to use as acorrect and complete basis the facts provided by the engaging party –especially numerical disclosures; this also applies to bookkeeping en-gagements. Nevertheless, he is obligated to indicate to the engaging partyany errors he has identified.
(2) The tax advisory engagement does not encompass procedures requiredto observe deadlines, unless the German Public Auditor has explicitlyaccepted a corresponding engagement. In this case the engaging partymust provide the German Public Auditor with all documents required toobserve deadlines – in particular tax assessments – on such a timely basisthat the German Public Auditor has an appropriate lead time.
(3) Except as agreed otherwise in writing, ongoing tax advice encompassesthe following work during the contract period:
a) preparation of annual tax returns for income tax, corporate tax andbusiness tax, as well as wealth tax returns, namely on the basis of theannual financial statements, and on other schedules and evidencedocuments required for the taxation, to be provided by the engagingparty
b) examination of tax assessments in relation to the taxes referred to in(a)
c) negotiations with tax authorities in connection with the returns andassessments mentioned in (a) and (b)
d) support in tax audits and evaluation of the results of tax audits withrespect to the taxes referred to in (a)
e) participation in petition or protest and appeal procedures with respectto the taxes mentioned in (a).
In the aforementioned tasks the German Public Auditor takes into accountmaterial published legal decisions and administrative interpretations.
(4) If the German Public auditor receives a fixed fee for ongoing tax advice,the work mentioned under paragraph 3 (d) and (e) is to be remuneratedseparately, except as agreed otherwise in writing.
(5) Insofar the German Public Auditor is also a German Tax Advisor andthe German Tax Advice Remuneration Regulation (Steuerberatungsvergü-tungsverordnung) is to be applied to calculate the remuneration, a greateror lesser remuneration than the legal default remuneration can be agreedin writing (Textform).
(6) Work relating to special individual issues for income tax, corporate tax,business tax, valuation assessments for property units, wealth tax, as wellas all issues in relation to sales tax, payroll tax, other taxes and duesrequires a separate engagement. This also applies to:
a) work on non-recurring tax matters, e.g. in the field of estate tax, capitaltransactions tax, and real estate sales tax;
b) support and representation in proceedings before tax and administra-tive courts and in criminal tax matters;
c) advisory work and work related to expert opinions in connection withchanges in legal form and other re-organizations, capital increasesand reductions, insolvency related business reorganizations, admis-sion and retirement of owners, sale of a business, liquidations and thelike, and
d) support in complying with disclosure and documentation obligations.
(7) To the extent that the preparation of the annual sales tax return isundertaken as additional work, this includes neither the review of anyspecial accounting prerequisites nor the issue as to whether all potentialsales tax allowances have been identified. No guarantee is given for thecomplete compilation of documents to claim the input tax credit.
12. Electronic communication
Communication between the German Public Auditor and the engagingparty may be via e-mail. In the event that the engaging party does not wishto communicate via e-mail or sets special security requirements, such asthe encryption of e-mails, the engaging party will inform the German PublicAuditor in writing (Textform) accordingly.
13. Remuneration
(1) In addition to his claims for fees, the German Public Auditor is entitled toclaim reimbursement of his expenses; sales tax will be billed additionally.He may claim appropriate advances on remuneration and reimbursementof expenses and may make the delivery of his services dependent upon thecomplete satisfaction of his claims. Multiple engaging parties are jointly andseverally liable.
(2) If the engaging party is not a consumer, then a set-off against theGerman Public Auditor’s claims for remuneration and reimbursement ofexpenses is admissible only for undisputed claims or claims determined tobe legally binding.
14. Dispute Settlement
The German Public Auditor is not prepared to participate in dispute settle-ment procedures before a consumer arbitration board (Verbraucherschlich-tungsstelle) within the meaning of § 2 of the German Act on ConsumerDispute Settlements (Verbraucherstreitbeilegungsgesetz).
15. Applicable law
The contract, the performance of the services and all claims resultingtherefrom are exclusively governed by German law.
Lizensiert für/Licensed to: Ebner Stolz GmbH & Co. KG Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft |4385435
Recommended