GT Solar could be next solar takeover target

BANGALORE (Reuters) – Solar and LED
equipment manufacturer GT Solar International Inc’s string of contract wins and
robust share gains this year could attract suitors eager for a foothold in a
relatively stable corner of the volatile solar power industry.

Headquartered in Merrimack, New Hampshire, GT Solar makes equipment to
manufacture both the cells used to make solar panels and polysilicon wafers, the
solar industry’s key raw material. It is the world’s third-largest supplier of
photovoltaic solar equipment behind U.S. rival Applied Materials Inc and
Germany’s Centrotherm.

Last year, GT Solar also entered the burgeoning LED business with its
purchase of sapphire maker Crystal Systems. As the solar industry seeks to
consolidate, however, many see the relatively small GT Solar as a seller rather
than a buyer.

“If a company like Applied Materials or even one of the other big
semiconductor capital equipment makers needed to quickly increase their exposure
to the solar market, GT Solar would fit very well,” said Kevin Landis, manager
of the Firsthand Alternative Energy Fund. GT Solar is the $7 million fund’s
largest holding.

French energy major Total SA’s $1.37 billion recent offer for a majority
stake in U.S. panel maker SunPower Corp, and chip and solar equipment
manufacturer Applied Materials’ deal to buy Varian Semiconductor Equipment
Associates Inc for $4.9 billion, have invigorated hopes of more dealmaking in
the solar industry, and GT Solar’s strong balance sheet, growing order backlog
and limited exposure to Europe are big selling points.

European markets such as Germany and Italy have been the driving force behind
the solar industry in recent years, but generous government incentives in those
nations are drying up and investors are eager to see companies move into growing
markets such as China and the United
States.

“We certainly expect companies that are leveraged to emerging markets outside
of Europe to see disproportionate market share growth given a stagnation in
European growth,” analyst Alex Morris of Raymond James said on
Thursday.

As new solar markets take off, large technology and industrial companies
might seek to enter or ramp up their solar power operations.

“Traditionally, we’ve seen acquirers come almost exclusively from industrial
conglomerates and the tech sector, which is what I’d expect if someone were to
make a bid for GT Solar,” Morris said. “That’s one of the things that made the
Total-SunPower deal so interesting; that it was a major oil and gas producer
doing the acquiring.”

Aside from top solar equipment maker Applied Materials, potential acquirers
could include Swiss conglomerate Oerlikon Corp AG, LED equipment maker Veeco
Instruments Inc, thermal processing equipment maker BTU International Inc, wafer
processing equipment maker Amtech Systems Inc and semiconductor equipment maker
Novellus Systems Inc as potential suitors.

GT Solar has stunned the market recently by announcing more than $710 million
in orders since the end of April. Its stock has gained 28 percent in that time,
although one analyst said the stock is still undervalued relative to what it
could bring to an acquirer.

“Out of all the public equipment companies, it is the most profitable. It is
going to command a much bigger premium than a comparable,” said Wunderlich
Securities analyst Theodore O’Neill, who rates the stock “buy” but owns none.

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