China Buying REC Solar for $640 Million Avoids Trade Spat

Nov. 24 (Bloomberg) — A Chinese company offered 4.34
billion kroner ($640 million) to buy REC Solar ASA, one of the
last makers of solar panels in Western hands, a move that may
help circumvent trade disputes in the U.S. and Europe.

The deal by a unit of China National Chemical Corp. would
follow a surge in demand for solar panels, absorbing much of the
production that companies supported by the government in Beijing
built in the past decade.

Authorities in Brussels and Washington have imposed
restrictions on Chinese solar panel imports after accusations
from competitors that products were sold below cost. That has
required Chinese companies that dominate the panel manufacturing
industry to establish subsidiaries with factories abroad that
are outside sanctions.

“More such cases are likely to follow, given Chinese
companies have a need to bypass international trade disputes and
to penetrate local markets,” said Xiaoting Wang, an analyst at
Bloomberg New Energy Finance in Hong Kong. “Chinese companies
will maintain their dominant position in the PV manufacturing
industry by owning more overseas capacities.”

The deal was recommended by REC Solar’s board and has
pledges from holders of 20.2 percent of the outstanding shares
not to sell before a general meeting convened to approve the
transaction, according to a statement released by the two
companies in Oslo.

China National Chemical’s unit China National BlueStar Co.
will complete the deal through a Norwegian unit, Elkem AS, which
employs 2,100 making solar-grade silicon and other alloys.

Search for Buyers

REC Solar has 1,700 workers mainly making panels at a
factory in Singapore. It was spun off in October 2013 from
Renewable Energy Corp ASA, which had closed all its solar
manufacturing capacity in Norway and focused on its solar
polysilicon business, now known as REC Silicon ASA.

The board was mandated to sell and started looking for
buyers from the start of the spinoff, Chairman Ole Enger said
today in an interview in Oslo.

Solar panel producers are recovering from a plunge in
prices that followed a surge in manufacturing as Chinese
companies expanded factory capacity in the past decade, building
the leading companies in the industry including Yingli Green
Energy Holdings Co. and Trina Solar Co.

Solar Potential

“The center of gravity in solar has certainly moved from
Europe to Asia,” REC Solar’s Enger said today at a news
conference. “This industry will be dominated by a few big
players. It’s going to be so big, a multi-hundred billion-dollar
business. It’s going to be as big as the oil industry.”

The demand for solar installations will be reinforced by
this month’s U.S.-China deal to cut emissions, Enger said. He
also said he expects the outcome of climate talks in Paris next
year to be “positive” for the industry.

“There’s a nice volume growth, which looks good for next
year as well,” Peter Hermanrud, an analyst at Swedbank AB, said
by phone from Oslo. For REC, he said, “There will be some
capacity growth next year so 2015 could be a transition year but
I believe 2016 will be a very exciting year.”

China controls all of the top 10 solar companies except
Hanwha Corp. of South Korea and Arizona-based First Solar Inc.,
according to data compiled by Bloomberg. At least two dozen U.S.
and European companies were sold off or went bankrupt in the
past decade.

Shares Rise

REC Solar rose as much as 15 percent, the most since
January, and was up 10 percent at 103.8 kroner by 2:10 p.m. in
Oslo. BlueStar’s cash offer of 108.5 kroner a share is a 22.6
percent premium to the one-month volume-weighted average price.

The price recovered by shareholders will likely be about
107 kroner a share after transaction costs, Enger said.

“The Elkem Group has a strategic goal to grow its presence
in the solar industry,” Chief Executive Officer Helge Aasen
said in the statement. “The Elkem Group and REC Solar have
developed a strong business relationship and there is a good
strategic match between the companies.”

After suffering from shrinking markets in Europe, where
governments have cut subsidies following the financial crisis,
producers of solar products like REC are also turning to the
U.S. market where installations will almost double by 2016,
according to Bloomberg New Energy Finance.

Bluestar bought Elkem in 2011 for $2 billion and has
production facilities in Europe, the Americas and Asia. It plans
to make use of REC Solar’s distribution channels, Aasen said.
REC Solar is the former solar division of REC ASA.

Nomura International Plc and Cipriano AS advised REC Solar
along with Advokatfirmaet Schojodt AS. Bluestar and Elkem were
advised by DNB Markets and the law firm Thommessen.

For Related News and Information:
China Pollution Spurs $2 Trillion Clean Energy Leap Forward

To contact the reporter on this story:
Mikael Holter in Oslo at

To contact the editors responsible for this story:
Will Kennedy at
Randall Hackley, Reed Landberg

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