LDK’s German Buy: Two Losers Combine 赛维LDK收购Sunways将使前者境况雪上加霜

By newsdoug on January 4, 2012

LDK Solar (NYSE: LDK), the weakest of China’s struggling solar panel makers, is starting off the new year with plans to buy another battered German competitor, a move that looks OK in theory for this sector in need of consolidation but one that will ultimately bring LDK even more headaches than it already has. LDK has offered to buy Sunways AG (Frankfurt: SWW) for 24 million euros, according to a media report, a relatively modest sum for a company of LDK’s scale. (English article) (company announcement) The rationale for this deal is relatively straightforward: Sunways will offer LDK new technology to boost the efficiency of its solar cells, making its products more competitive. The German company will also offer LDK manufacturing facilities outside its home China base, an important diversification move as both the US and Europe consider levying anti-dumping tariffs against solar cells manufactured in China. The main problem is that Sunways is losing money, and is unlikely to see its position improve anytime soon as the industry suffers through its worst-ever downturn. LDK, meantime, is hardly in a position to provide the German company with much financial help, having itself sunk deeply into the red last year as it struggles under a heavy debt load. Asian companies have traditionally had a difficult time with European acquisitions, as labor laws in those countries tend to be very tough and unions also provide a big challenge to inexperienced Asian firms. I see lots of conflict ahead for LDK ahead if this merger proceeds, making the company’s already troubled situation even worse and setting the stage for a difficult year in 2012.

Bottom line: LDK’s planned purchase of a German solar panel maker will create more problems for the already shaky company.

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