More Mergers in Solar Space (WFR)

MEMC Electronic Materials Inc. (NYSE: WFR) has not gone without its own problems, despite having migrated from a semiconductor stock to being thought of as a PV materials manufacturer for the solar industry.  Yet, it seems that the company is willing to show that it is still interested in what lies ahead for the solar sector as it has announced an acquisition in the space.  MEMC has agreed to acquire Solaicx Inc., maker of silicon wafers for photovoltaic panels, in a deal valued at $66 million in cash or up to about $76 million based on incoming investment.

Solaicx has developed proprietary continuous crystal growth manufacturing technology to produce low-cost and high-efficiency monocrystalline silicon wafers for PV sales.  The company noted that enhanced electrical performance of its wafers from ingots allows for production of higher efficiency cells with very competitive silicon costs.

What is perhaps more important than the detail is the MEMC noted that the combined company will have low-cost polysilicon and crystal operations in North America and sales and support offices around the world.  That might not be the lowest-cost provider status, but solar players still have to continue to figure out the fine line between cutting solar production costs and trying to maintain margins in sales.

Solaicx has about 80 employees and a large-scale production facility in Portland, Oregon.  As far as what the raw costs are, that is not going to immediately known.  MEMC simply said that this acquisition will help the company significantly reduce the cost of monocrystalline silicon.

The merger consideration is also subject to adjustment based on the net working capital of Solaicx at the deal’s closing; and the deal also includes an earn-out based upon certain performance targets in 2010 and 2011.  Those earnouts are up to an additional $27.6 million payable to Solaicx security holders, consisting of cash and MEMC common stock at the election of the security holder.

We have started seeing more and more of these bolt-on acquisitions in the solar sector like this.  We have yet to see any sizable deals between two large players.  That may be coming down the road.

JON C. OGG