REpower Systems was founded in 2001 and operates in the wind energy sector, specializing in high output turbine technology particularly suited to offshore turbines. It is a leader in 5MW turbines.
Suzlon is Asia's largest wind power company and the fifth largest in the world. While explaining the rationale underlying its bid, Tulsi R. Tanti, chairman and managing director of Suzlon, alluded to his stated intention to establish a top three position in Asia, the Americas and Europe saying ôthe wind energy industry is growing rapidly and the fundamentals of the industry remain strong. This is the right deal at the right timeö. Corroborating his vision of the industry, Tanti has grown SuzlonÆs revenues at a CAGR of 145% over the 2003-2006 period. His bullishness is further evidenced by the Ç1.02 billion ($1.33 billion) bid he made for REpower on February 9, 20% higher than Areva's bid.
REpower is in play since January 22 when Areva SA, France announced its friendly offer for the company saying its bid ôwill enable REpower to have the necessary financial strength, engineering expertise and commercial reach to accelerate its development, particularly in offshore projects.ö Areva is a technical supplier of equipment for nuclear power plants.
Areva bid Ç105 per share representing a total equity value of Ç850 million. Areva is currently the single largest shareholder in REpower with a 29.9% stake it acquired in 2005; at the time Areva cited the complementarity between nuclear and wind energy as a compelling factor driving its investment. It has now bid for the entire 70% it does not own, with its offer being conditional on achieving a simple majority i.e. 50% plus one share.
Suzlon has bid Ç126 per share, topping the Areva bid by Ç21 per share, representing an equity value of Ç1.02 billion on an aggregate basis. Suzlon is bidding in consortium with Martifer, Portugal, a steel construction company operating across Europe and the second largest shareholder in REpower with a 25.4% stake. Suzlon and Martifer will establish a special purpose vehicle to effect the bid in which Suzlon will own 75% and Martifer 25%.
SuzlonÆs offer represents a 40% premium to Repower's share price on January 19, the last trading day before Areva's overture and a 76% premium to the average volume weighted share price of REpower over the 3 month period prior to the Areva bid being tabled. Suzlon has not attached a conditionality regarding minimum shareholding, something analysts believe investors will view in Suzlon's favour. However, with both bidder consortiums already owning significant stakes in REpower, this may not be a significant factor in the final decision.
This will be Suzlon's second significant-sized cross border acquisition. In March, 2006 Suzlon acquired Hansen Transmissions, Belgium, a wind energy and industrial gearbox manufacturer, for $565 million in an all cash deal. Suzlon's ambitions in the wind power industry are backed by a number of financial investors who hold shares in Suzlon, led by Citicorp International Finance Corporation which had a 3.82% stake as per SuzlonÆs latest stock exchange filing for the quarter ended December, 2006.
YES Bank and ABN AMRO are financial advisors to Suzlon. Citigroup and Freshfields are advisors to Areva.
The share price of REpower has already risen more then 100% from Ç55 levels in September 2006 when analysts first started speculating that the company was an attractive takeover target. REpower shareholders obviously welcomed the bidding war and its shares closed up a further 25% on the Frankfurt Stock Exchange on Friday, ending the day at Ç142. Bankers tracking the deal commented that Areva was sure to put in a counter-bid as the synergetic fit was high and Areva would have kept some room for manoeuvring in tabling its first bid.
It remains to be seen who is ultimately successful and at what price but one sure winner both in the Corus case and this instance is the equity shareholders who are seeing the trading price of the equity they hold rise manifold.
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