Renesola Rights Plan: Consolidation Coming
The alternate energy sector’s current downturn may have bottomed, but signs of pain still linger, as reflected by the latest announcements from Renesola (NYSE: SOL), which may be bracing for hostile takeover attempts, and Yang Ming Wind Power (NYSE: MY), which reported anemic results and sharply reduced its full year outlook. In what looks like a first for the industry, Renesola has announced it will implement a shareholder rights issue plan, something companies do when they believe they could face a hostile takeover bid. (company announcement) Renesola added it knows of no imminent hostile takeover bids, but is rather seeking to protect its shareholders in case such a bid occurs. With a share price that has tumbled by more than two-thirds since March and a rock-bottom price-to-earnings ratio of 1.7, Renesola could indeed look like an attractive takeover target in an industry that is sorely in need of consolidation. Investors also seem to believe something may be in the works, with Renesola’s battered shares jumping more than 7 percent in Monday trade on Wall Street. Given such low valuations, I wouldn’t be surprised to see a buyout or two announced for Renesola or one of its other battered mid-sized competitors in the next few months. Meantime, Ming Yang has come out with its own weak results, and reduced its full year sales outlook by a hefty 20 percent. (company announcement) Even the lower full-year target looks difficult, with the company saying it hopes to sell 1.8 to 2 gigawatts worth of wind turbines in 2011, after selling only 0.7 gigawatts worth in the first half of the year. Its recent tie-up in China with the developer of the Three Gorges Dam project could put some wind back in its sails (previous post) in the second half of the year, but I wouldn’t be surprised to see more downward revisions before the year is finished.
Bottom line: Renesola’s shareholder rights plan could signal a coming wave of consolidation in the solar sector, with mid-sized companies like Renesola as attractive buy-out targets.
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