INDIA: Suzlon Energy in talks to acquire German firm REpower for $1.3b

For Corporate India, this may turn out to be another thrilling takeover battle. And it’s a familiar stage as an Indian corporate major and a French giant slug it out. India’s largest wind power firm Suzlon Energy is in talks to acquire Germany’s REpower. Senior company officials said Suzlon has made a public bid of e126 per share for REpower, outbidding Paris-based nuclear major Areva. Suzlon’s bid estimates the deal size at about $1.3 billion.

Suzlon director Girish Tanti said his company has made a counterbid to Areva’s bid of e105 per share. “The bidding process is likely to continue for 4-6 weeks,” he said. Suzlon, if successful in the bidding, plans to fund the acquisition through a mix of debt and internal accruals. Paris-based Areva, the No 1 maker of nuclear reactors, offered e105 per share on February 5 for 70% of the German company. Shares of REpower surged as much as e26.48, or 23%, to e140. Speculation is strong that Areva may sweeten its bid. Suzlon’s bid is being made in partnership with Martifer, a unit of Portugal-based Mota-Engil SGPS, which owns a quarter of REpower.

REpower, Germany’s third-largest maker of wind-power equipment after Vestas Wind Systems and Enercon, reported a 9-month profit of e1 million compared with a year-earlier loss of e8.3 million, riding increasing demand for wind power. “Suzlon is partnering with Martifer. The latter has a joint venture with REpower in Portugal. Suzlon and Martifer have signed a legally binding agreement, which sets out the terms for this offer. The offer will be made through BidCo, in which Suzlon holds 75% and Martifer 25% of the capital. Suzlon will finance the offer and Martifer will support it,” said Suzlon officials.

Suzlon said it will seek the support of the REpower management along with Martifer for the offer and claimed that it has a strong interest in working with REpower’s existing management in the future. Suzlon’s bid follows Tata Steel’s recent $12-billion agreement to buy UK’s Corus Group as Indian companies unleash a takeover spree on foreign rivals.

According to a Suzlon communiqué, a combination with REpower would be “uniquely positioned to establish sustainable global market leadership in the wind industry with outstanding R&D capabilities and an integrated supply chain”. Suzlon said Hamburg would remain the headquarters of REpower, and that it plans to create 100-200 highly qualified R&D jobs in Germany. Areva, an investor in REpower since 2005, plans to use its network of utility customers to drive sales of wind turbines. The German company has operations in France and elsewhere in Europe, and is planning expansions in China, India and North America.

Suzlon Energy, market leader in Asia and the world’s fifth largest wind turbine manufacturer by annual installations, is currently on a mega expansion drive in the international market. In March 2006, it bought Belgium-based Hansen for $565 million. The acquisition of Hansen through holding firm EVE, which was an all-cash transaction, was close on the heels of another $60 million investment in a wind turbine-manufacturing unit in China.