LDK Solar (LDK)’s plan to buy Germany’s Sunways AG (SWW) providing China’s second-largest solar-panel maker with access to new technology and a distribution network in the world’s biggest photovoltaic market.
Sunways shares rose (SWW) the most in six months in Frankfurt yesterday after LDK offered to purchase the Constance-based solar-cell and module maker for about 24.2 million euros ($31.3 million), excluding contributions in kind. The acquisition would be the first by a Chinese solar-energy company in Germany, where a record 7,400 megawatts of solar capacity was installed in 2010.
LDK “will buy a company with a well-known brand, decent technology and established sales channels for little money,” Stefan Freudenreich, an analyst with Equinet Bank AG, said by phone from Frankfurt yesterday. The Chinese company will also get access to Sunways’ solar-inverters business, devices used in all photovoltaic installations, he said.
German panel makers are struggling as demand is falling and competition from Asia is rising. Added capacity at Chinese manufacturers has resulted in price declines that contributed to insolvency filings in December by Solar Millennium AG (S2M), a project developer with headquarters in Erlangen, Germany, and Berlin- based module maker Solon SE. (SOO1)
“The hope has arisen that consolidation of the solar industry has started,” Erkan Aycicek, an analyst at Stuttgart, Germany-based Landesbank Baden-Wuerttemberg, said yesterday. “The recent insolvencies also mean that overcapacity is being reduced.”
Quarterly losses
Sunways, which was profitable (SWW) in 2010, reported losses in the first and third quarters of 2011. Its products include solar inverters, which convert electricity from panels for use on the power grid, as well as modules and cells. Xinyu-based LDK supplies (LDK) Sunways with wafers, which are cut into cells.
The German company is backing a full takeover “as this would give us an anchor investor and easier access to financing to pursue growth,” Harald Schaefer, a spokesman for Sunways, said by phone yesterday.
“Sunways has come under financial pressure and it may have had no alternative than selling to LDK, with which it has cooperated for years,” Freudenreich said. Solar-Fabrik AG (SFX) is also a potential takeover target for Chinese producers because of a successful business model, access to German sales channels and a “very cheap” price, the Equinet analyst said.
Solar-Fabrik talks
Solar-Fabrik is in talks with other companies in the industry, including from China, over possible cooperation agreements, Chief Executive Officer Guenter Weinberger said in a phone interview yesterday. The Freiburg-based company, which obtains solar cells in Asia for manufacturing modules in Germany, isn’t planning a share sale, making a takeover by another company more difficult, he said.
Production of inverters has already started to shift from Europe to China and Southeast Asia as manufacturers seek to cut costs, Bloomberg New Energy Finance said in a November 30 note. “Even for inverters manufactured in Western markets, the drive for cost reductions means more of the components are being sourced from Asian markets,” the research agency said.
The solar-panel supply glut in China may lead to a consolidation, cutting the number of domestic manufacturers to 15 within five years, according to the Beijing-based Energy Research Institute at the National Development and Reform Commission. There were 330 panel makers in 2008, the Chinese Renewable Energy Society estimated.
Separate brands, listings
LDK and Sunways plan to complete their transaction by the end of the first quarter and the German manufacturer will maintain its own brand and stock market listing, the companies said yesterday in a separate statement. LDK, which posted losses in the second and third quarters of 2011 compared with year- earlier profits, said it’s “convinced of the Sunways products and business model.”
The contributions in kind include Sunways taking indirect ownership in a Chinese company, providing the German manufacturer with access to module production in that country as well as sales outlets for inverters, they said.
Sunways rose (SWW) 21 percent to 1.87 euros at the close in Frankfurt yesterday. That pared the stock’s decline in the past 12 months to 53 percent.
LDK is unlikely to keep Sunways’ solar-cell production plants in the long run amid global overcapacity, though it may develop new cell technology in Germany and expand the inverters business, Freudenreich said.
German technology
“This is the first Chinese company grabbing German inverter technology,” Freudenreich said. “With LDK’s help, Sunways may be able to sell inverters in growing markets such as China and the US”
The Chinese company has signaled that the German manufacturer’s cell plants will be kept operating amid a push to develop “premium products made in Europe,” said Schaefer, the Sunways spokesman.
Robert Bosch GmbH said on December 21 that it bought Conergy AG’s solar inverters unit, putting the Stuttgart-based car-parts maker, the world’s biggest, into competition with established suppliers including Germany’s SMA Solar Technology AG (S92) and Power- One based in Camarillo, California.
