Sany and Yingli Take Different German Tacks 三一重工和英利的德国交易或前景迥异
I’ll start off today with a couple of news bits from Germany, one from the industrial equipment sector where Sany Heavy Industry (Shanghai: 600031) has made a major acquisition, and the other from the solar sector where Yingli (NYSE: YGE) has made a major sale. These 2 deals don’t really have much in common beyond the fact that both are in Germany, but for me the former illustrates a dubious approach for Chinese firms that want to enter Europe’s largest market, while the latter looks much more prudent. The first deal will see Sany acquire Putzmeister Holding, a concrete pump maker, in a purchase both companies say is the largest ever for a Chinese firm in Germany. (English article) The fact that they don’t give a price leads me to believe Sany didn’t give much cash for this deal, but rather is going to assume a big debt load for a company that may be marginally profitable or is more likely losing money. That would follow a pattern by other Chinese companies in Western Europe, including TCL’s (Shenzhen: 000100) purchase of the TV assets of France’s Thomson and the purchase of Siemens’ cellphone business by Taiwan’s BenQ, both of which ended in complete disasters and nearly drove their acquirers to financial ruin. In this case Sany looks equally unprepared for such a purchase, especially dealing with Germany’s tough labor laws and unions, and I see bad things ahead for both companies. In the other deal, Yingli has signed a deal to sell up to 200 megawatts worth of solar modules to a German company, IBC Solar AG, including 180 megawatts in 2012 alone. (company announcement) This kind of deal is of course much more traditional, involving a simple sale of products that has much less risk involved than the M&A approach being used by Sany. It also comes as Germany prepares to cut back many of its government incentives for installation of new solar projects, and looks like Yingli and IBC are racing to take advantage of some of those incentives while they can. (previous post) My final comment on these deals would be: Nice job on a big sale for Yingli, and, Look for stormy weather ahead, Sany.
Bottom line: Sany’s purchase of a German firm will see numerous problems in the next 2 years, while Yingli’s latest German sale looks like a major deal before government incentives are reduced.
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