Taiwan's E-Ton in US acquisition

E-Ton Solar Tech acquires Adema Technologies for $154 million to secure a supply of high-quality raw materials.
Taiwan's E-Ton Solar Tech will acquire Adema Technologies, which has operated from its base in California since 2000, for $154 million.

Adema supplies monocrystalline silicon ingots for the solar-power industry and produces large-diameter ingots for semiconductor manufacturing.

"E-Ton will pay around $55 million by way of a stock swap and the balance through a private placement of equity," explains E-Ton's CFO Reynold Hsu in an exclusive interview to FinanceAsia.

Details of Adema's financials were not disclosed because it is a privately held company, wholly owned by founder George Fiegl, but sources close to the deal said it earned a revenue of $33 million for the latest financial year. This suggests a price to turnover ratio of around 4.66.

Analysts have been predicting that growing competition and raw material shortages could put pressure on the margins of solar companies. E-Ton hopes to address this problem via the acquisition by leveraging AdemaÆs technical expertise and its key relationships with suppliers to secure a stable raw material base.

"Adema is predicting revenue growth around 50% year-on-year for the next two years," says E-Ton's Hsu. "It also has long-term contracts with key suppliers of raw materials which are very valuable."

Adema has supplied raw materials to E-Ton in the past making E-Ton comfortable with the quality of its output. Currently, E-Ton is not sourcing from Adema.

Adema will continue to operate independently, as a standalone subsidiary of E-Ton. "Adema founder Fiegl will continue as CEO for the foreseeable future although I cannot disclose details of his lock-in," adds E-Ton's Hsu.

E-Ton Solar Tech was founded in 2001 and is TaiwanÆs second largest manufacturer of solar cells (also known as photovoltaic semiconductors). Its solar cells are used in power-generating panels that appear on roofs, buildings, toys and consumer electronic goods such as calculators. For the latest financial year ended December 2006, E-Ton had sales of NT$3.37 billion ($102 million) on which it earned a net profit of NT$731 million.

Like other Taiwanese solar companies, E-Ton is trying to develop higher efficiency solar cells with innovative technologies to reduce the cost of solar power through more efficient production. It has a production capacity of 100MW per annum, which will expand to 200MW this year with further plans afoot to grow this to 260MW by 2008.

Merrill Lynch predicted in a recent research report that the global solar power industry, which accounted for less then 0.1% of power generation in 2005, could reach 3% by 2020, a quantum leap on the current base. E-Ton itself has been growing rapidly and won the Deloitte Technology Fast 500 Asia-Pacific 2006 Award for achieving a revenue growth over a three year period of 8,350 percent.

Credit Suisse advised E-Ton Solar on the Adema deal.
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