August 7, 2022

Solar Firms Attract Market Interest, but Few Are for Sale

FRANKFURT — Snatching a well-managed and profitable solar company has been creeping up the agenda of global groups that are hoping to expand their renewable energy portfolios in the post-Fukushima world.

But finding a good company in the sector that is also available is not proving to be easy.

The nuclear disaster at the Fukushima Daiichi plant in Japan in the aftermath of an earthquake and tsunami in March and Germany’s subsequent decision to pull out of nuclear power completely have given extra impetus to the arguments in favor of renewable energy.

Observers have been predicting a takeover spree for years, but buying into the green energy boom is difficult, since many of the most attractive companies in the solar sector are part-owned by their founders or chief executives, making direct takeovers tricky.

Nevertheless, in April it appeared that the starting gun had been fired: The giant French energy group Total made a landmark $1.4 billion offer for a majority in the U.S. company SunPower; and the Swiss solar equipment maker Meyer Burger bid €356 million, or $504 million, for a German rival, Roth Rau.

In May a survey carried out by the consulting firm KPMG showed that a third of investors and executives in the renewable energy sector were planning to make investments in the solar industry over the next 18 months.

The solar industry presents a rich hunting ground for utilities and industrial conglomerates, given the range of attractive takeover targets. In contrast to the wind energy sector, the solar industry is still considered young, even exciting, and hence it is still just at the beginning of its consolidation process.

But the story of the solar industry is also one of founders and pioneers who want to hold on to their companies in the current boom.

So any potential acquirers would have to bring their full powers of persuasion to bear.

“It’s an industry where real entrepreneurship played a very important role,” said Michael Tappeiner, an equity analyst at UniCredit in Munich. “These are real entrepreneurs that have built their companies under their own steam and they know their products in and out.”

Germany, the world’s largest solar market by sales, is full of leading edge companies that would make attractive additions. The two biggest, and probably most attractive, companies also have very protective owners who have established solid defenses against possible hostile takeovers by limiting the number of shares that are available to buy.

Frank Asbeck, founder and chief executive of SolarWorld — at €1.1 billion, the second-largest German solar company by market value after SMA Solar — is a case in point.

Known to some as the “sun king,” as much for his outgoing nature as his most recent career choice, Mr. Asbeck first made headlines in late 2008 when he attempted to take over the German factories of the General Motors Opel unit.

Now he owns 27.8 percent of SolarWorld and he said this month that selling his stake was “out of the question.”

Centrotherm, another German company and the world’s No. 2 solar equipment maker behind Applied Materials of the United States, has been holding up well during the intense pricing pressure that has hit the industry, thanks to strong demand from Asia. The company made its first-ever dividend proposal this year.

More than half of the company’s voting rights are held by its chief executive, Robert Hartung, who is also a majority shareholder of TCH, which in turn holds 50 percent of Centrotherm’s shares. His father, Rolf Hartung, holds a 15 percent stake in TCH.

“Entering the solar market aggressively through acquisitions appears less likely,” Mr. Tappeiner of UniCredit said with regard to strategic acquisitions by larger utilities.

Björn Glück, a fund manager at Lupus Alpha in Frankfurt, said that companies with real technological advantages would be the most sought after; he cited Wacker Chemie and SMA Solar in particular.

Wacker Chemie is the world’s No. 2 producer of polysilicon, a key raw material for the solar and semiconductor industries. The No. 1 producer is Hemlock Semiconductor Group of the United States.

In a poll compiled by the equity research analysis firm StarMine, nearly two-thirds of analysts rated Wacker Chemie a “buy.” Since its initial public offering in April 2006, the company’s shares have increased about 60 percent.

Shares in SMA Solar, the world’s largest maker of solar inverters, have seen equal gains since their I.P.O. in June 2008.

But more than half of voting shares in Wacker Chemie are owned by the Wacker family. And more than 70 percent of SMA Solar is held by its founders and their families through holdings and foundations.

SMA, the most profitable German solar group, has repeatedly ruled out significant changes to its shareholder structure.

Only serious difficulties, analysts said, could push those companies into the arms of big cash-rich groups, a scenario that is not unlikely, given the number of uncertainties in a young and busy industry that still is still helped by subsidies.

A more likely interim trend is the emergence of partnerships. In the future, solar companies will struggle to stand entirely alone, given their lack of investment and problems with economies of scale, analysts said.

Shi Zhengrong, the founder and chief executive of Suntech Power based in Wuxi, China, the world’s biggest maker of solar cells, said selling his 30 percent stake in the company was not an option.

However, Mr. Shi, who won Fortune magazine’s award for Asia businessman of the year in 2009, added that companies would find other ways to link up.

“In the long term, a partnership across the value chain will be quite feasible, it will be inevitable,” he said in Germany this month.

Christoph Steitz is a Reuters correspondent.

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