Delta Electronics, Inc. and Neo Solar Power Corp. (NSP) announced the strategic cooperation plan. NSP will launch a tender offer on 13% to 15% stake in DelSolar Co. from November 20th to December 14th. Each DelSolar share tendered will receive 0.703 newly issued NSP share and NT$0.5 cash as consideration, implying around 5% premium to DelSolar’s closing price as of November 16th. Delta Group is a global leader in power supply and thermal management solutions. Over the past years, Delta has been actively involved in energy saving and new energy solutions with long-term commitment. Delta currently owns around 54% in DelSolar.
Chairman of Delta, Mr. Yancey Hai, and Chairman of NSP, Dr. Quincy Lin, both indicated that this cooperation will consolidate the cell and module businesses of NSP and DelSolar and the system business of Delta, thus forming a highly competitive supply chain. The combined entity will become the largest solar company in Taiwan as well as a global leading player. Upon completion of the tender offer, NSP will further assess a potential merger with DelSolar at consideration equivalent to the tender offer. If the merger is completed, Delta will become the largest shareholder in the combined entity with long-term support and commitment. Delta agreed to support current NSP management team and to assistant NSP in integrating DelSolar’s solar cell, module and system businesses. In addition, in an effort to strengthen the financial structure of the combined entity, Delta is prepared to participate in the fund raising activities of the combined entity with an amount of up to NT$1.5bn.
The combined entity will have solar cell capacity of close to 2GW and become the largest solar cell manufacturer in Taiwan and second largest globally. NSP and DelSolar are both leading solar cell manufacturers in Taiwan with superior R&D and technology capability. NSP currently has solar cell capacity of 1.3GW and module capacity of 60MW through its subsidiary General Energy Solutions. DelSolar currently has solar cell capacity of 600MW, module capacity of 180MW and involvement in downstream system business.
The new company will have solar module capacity of 240MW and a cross-strait cell/module manufacturing base, achieving a great combination of both low cost and advanced technology. Meanwhile, with the significant enlarged economy of scale, the combined entity is expected to extract synergy from largely reduced procurement cost and the integration of R&D and sales resources and further strengthen its competitiveness and leadership in the global solar industry.
The solar industry has been extremely volatile since last year given severe changes in macro environment, including reduction of subsidies from major European countries given sovereign debt crisis as well as depressed pricing from over supply issue, and the industry as a whole is looking forward to consolidation. Despite the foregoing, industry surveys remain optimistic about the demand outlook of solar energy, especially considering that governments worldwide continue to actively promoting energy saving policies.
According to iSuppli, 2012 global solar demand will reach 35GW, up 34.6% versus 26GW in 2011. While the over supply issue has not yet been resolved, technology and cost leadership would be the two key differentiators for solar companies to excel in the long run. Integration between solar cell and module/system is also expected to be a major development trend in the industry.UBS acted as lead financial advisor in the transaction. Grand Cathay acted as joint financial advisor and tender offer agent.