Wednesday, December 09, 2009

Alternative Energy & Vertical Integration

Swiss solar power firm Meyer Burger to buy 3S
By Emma Thomasson - Reuters

ZURICH, Dec 9 (Reuters) - Swiss solar industry supplier Meyer Burger is buying 3S Industries in an all-share deal worth about 300 million Swiss francs ($294 million) that should help cut the cost of solar power.

Shares in both companies rallied on Wednesday after the announcement of the friendly deal, which analysts expect to boost Meyer Burger's profit and increase 3S's reach into Asia.

Meyer Burger said the deal would create the first firm in the solar industry to cover the whole production process for making solar cells, thus helping it to slash solar power costs.

Meyer Burger, which makes precision saws for slicing silicon wafers, is offering one of its own shares for every 11.2 3S shares, valuing 3S at about 300 million francs based on Meyer Burger's Tuesday closing price.

The proposal would be presented to shareholders of both companies for approval at extraordinary general meetings set for Jan. 14. The deal is due to be completed around Jan. 21.

Meyer Burger shareholders would also be asked to approve a 10-way share split and a share capital hike of between 653,138 and 2.25 million francs, with the newly issued shares due to start trading on Jan. 18.

Vontobel analyst Michael Foeth said the Meyer Burger share dilution was about 35-45 percent, while the deal should boost earnings by 30-35 percent. "As such, the exchange ratios look fair and the deal makes sense," he wrote in a client note.

Meyer Burger shares, which had already doubled in value this year after slumping in 2008, were up 7.8 percent at 266.25 Swiss francs by 1044 GMT, while Berne-listed 3S shares jumped 20 percent to 23.10 francs.

The FTSE clean tech index was flat after solar stocks like Germany's Q-Cells, SolarWorld and Norway's Renewable Energy Corp rose on Tuesday on positive sentiment from the Copenhagen climate summit.

"From a strategic point of view, this transaction makes a lot of sense," said Helvea analyst Stefan Gaechter, adding that the deal will help 3S increase its exposure in Asia.

"Not only are the portfolios complementary but the cross-selling potential and the bundling of purchasing volumes with regards to material costs are also value-adding."

3S's chief executive, Patrick Hofer-Noser, said the merger should "generate excellent opportunities to take advantage of the promising and expected further growth of the solar market."

Meyer Burger's chief executive, Peter Pauli, added: "We will play a crucial role in further reducing the costs of solar power and thus help achieving the industry goal of grid parity faster."

The solar sector leans on government incentives to compete with traditional power sources, but industry experts believe it will be economically viable in the near future.

Meyer Burger had 2008 sales of 455 million francs, while 3S had sales of 102 million francs. The combined firm is expected to employ more than 900 staff.

Chinese and European solar power companies have been upbeat about next year, saying recently that demand for clean energy systems was rebounding after a dismal 2009.

No comments: