Shares in solar cell makers Neo Solar Power Corp (NSP, 新日光) and DelSolar Co (旺能) moved up sharply yesterday following the two companies’ announcement of a merger a day earlier, dealers said.
Investors were upbeat that the alliance will offset problems created by a supply glut in the solar energy business and strengthen the new entity’s bottom line, they said.
At the end of Taipei trading, shares in NSP increased 6.78 percent to NT$15.75, while shares in DelSolar rose 6.67 percent to NT$11.2.
“It seems that investors are happy with the deal. The local solar energy business has finally taken action to deal with the oversupply the sector is facing,” Grand Cathay Securities (大華證券) analyst Mars Hsu (徐振家) said.
NSP on Monday announced that it would launch a tender offer to acquire a 13 to 15 percent stake in DelSolar between yesterday and Dec. 14.
According to the tender offer, shareholders of DelSolar will receive 0.703 NPS shares and NT$0.5 in cash for every DelSolar share, representing a 5 percent premium over the closing price of DelSolar’s shares on Friday last week.
After the tender offer, NSP will initiate another stage of consolidation by acquiring the balance of outstanding DelSolar shares by the end of June next year.
Following the merger, the surviving entity, which will keep the name Neo Solar Power Corp, will become the largest solar cell maker in Taiwan and the second-largest in the world.
The tender offer is worth an estimated NT$440 million (US$15 million) and the value of the whole deal has been pegged at just under NT$3 billion.
“To my knowledge, existing production capacity in the global solar energy business is about double total demand,” Hsu said. “Consolidation, like this deal, or companies dropping out of the market is inevitable.”
Delta Electronics Inc (台達電), a leading power management solutions provider in Taiwan that currently holds a 54 percent stake in DelSolar, will have a 17 percent share of NSP after the merger is completed.
“It is a good deal for NSP. Delta is well-known for its strong financial structure. I expect the solar cell maker will benefit from the marriage in the long run,” Hsu said.
Delta provides total solutions in power management and Hsu said NSP is expected to be included in Delta’s supply chain and would likely take advantage of its broad customer base.
According to Delta, NSP intends to raise funds after the merger is completed and expects to inject NT$1.5 billion into the new company as part of the fundraising effort.