One Solar Merger Could Spark Others

We have long wondered if (or when) the wave of solar mergers was coming. We have seen several small deals, but so far we have yet to see any serious M&A in the solar sector when it seems that the only way these companies can ultimately make it is to band together to fend of Chinese solar dumping and margin pressures as government subsidies are ending.

Today we have reports that the insolvent German solar player called Q-Cells is being acquired by Hanwha Chemical Corp. of South Korea. Without having all the details it is hard to peg as to whether other deals would or could be announced. Today’s news is substantial in that it could be the basis for more solar mergers, even if every single merger could be challenged by disgruntled shareholders who are “long and wrong.” The surprise could be that China’s solar players may have to get involved too.

First Solar Inc. (NASDAQ: FSLR) is the leader in the United States, without what many industry insiders consider to be inferior products. If M&A comes about, we expect First Solar to be on the giving end rather than the receiving end.

SunPower Corp. (NASDAQ: SPWR) is one which we always just assumed would be acquired by Total SA (NYSE: TOT) since its majority stake was taken, but that stock has slid and slid.

JA Solar Holdings Co. Ltd. (NASDAQ: JASO) reached an agreement to purchase privately held Silver Age Holdings Ltd. last year.

Real Goods Solar Inc. (NASDAQ: RSOL) also has previously acquired privately held Alteris Renewables.

MEMC Electronic Materials Inc. (NYSE: WFR) has ticked up this Friday and it remains so battered that it is hard to imagine that a deal could come for the silicon wafer-maker that sells to solar and semiconductor companies.

Be advised that there are still more problems than there are hopes. For instance, SolarWorld posted an operating loss earlier this month. Another risk is that we recently said Suntech Power Holdings Co. Ltd. (NYSE: STP) sounded doomed after its fraud disclosure.

Stay tuned to this developing story because it could fuel more interest in what has been perhaps the ugliest sector of all over the last 18 months.

JON C. OGG