WFR Buys Solaicx for $103.6M – Analyst Blog

Filed in Debt, earnings, Gold Investing, Private Placement, shares by on May 25, 2010 0 Comments

MEMC Inc. ( WFR ), one of the larger makers of silicon wafers in the world, took another step toward solidifying its position in the solar market. On May 24, 2010, WFR announced a definitive agreement with Santa Clara, California based Solaicx, a privately held manufacturer of low-cost, high-quality silicon ingots. The acquisition is a positive move as Solaicx’s innovative and advanced manufacturing technology will enable WFR to reduce costs and improve efficiency. Particularly so since the other solar acquisitions in recent times have shown results on its margins. Last year, the company acquired solar fab developer SunEdison for $200 million and followed it up with a solar financing outfit called Tioga Energy. The Solaicx acquisition is further evidence of the fact that WFR is very serious about its solar strategy. We expect WFR to leverage the lower cost structure of Solaicx to capture the monocrystalline silicon market, which according to sources, is expected to grow at a compound annual growth rate of about 50 percent during the next three years. Under the terms of the deal, WFR will have to pay $66.0 million to Solaicx’s share holders at closing, plus additional cash equal to recent investments or investments that may be made prior to closing, by its existing share holders, which is estimated at about $10 million. The cash payment also includes Solaicx’s debt. Further, the total cash payment will be dependent on Solaicx’s net working capital at closing. Moreover, the company will have to pay up to an additional $27.6 million if certain production targets are met in 2010 and 2011. The payment will be made in either cash or WFR shares at the option of the payee and if shares are opted for, they will be issued as a private placement. The deal is expected to close by June 30. WFR expects the acquisition to be accretive to earnings in 2011, subject to purchase accounting adjustments. Recently, WFR reported strong first quarter revenue driven by strong sales at SunEdison, but posted a loss per share of $0.04, driven by weaker sales at its semiconductor wafer division and a margin shortfall at its solar wafer division. We maintain our short-term Hold rating on WFR. Read the full analyst report on “WFR” Zacks Investment Research

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WFR Buys Solaicx for $103.6M – Analyst Blog

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