Mumbai: Looking to boost its global share of wind power equipment, Suzlon Energy Ltd has offered to buy German rival Repower Systems AG for €1.02 billion (Rs5,800 crore), topping a bid from French nuclear-reactor maker Areva SA by 20%.
Repower shares jumped 26% to €141.55, sharply higher than the Suzlon bid of €126 a share, as investors expected Areva to sweeten its offer of 5 February. Areva had previously bid €105 a share for the remaining 70% of Repower that it doesn’t own.
Suzlon’s partner in the bid is Martifer, a unit of Portuguese builder Mota-Engil SGPS, which already owns 25% of Repower. Suzlon said it has an option to buy Mortifer’s stake in Repower. Suzlon’s bid doesn’t require any minimum percentage of Repower shares. The offer by French state-owned Areva depends on it gaining a stake of more than 50%.
Suzlon CMD Tulsi Tanti said Repower would give it a presence in northern Europe and enhance its technology and offshore market capabilities. Repower would profit from Suzlon’s financial might and supply chain. Suzlon, which has seen its market capitalization climb sharply in recent months to Rs 35,830 crore, saw its shares fall about 1% to Rs 1,245.15 on the Bombay Stock Exchange.
“This entire market is in hype dimension,” said Matthias Schrade, an analyst at GSC Research in Dusseldorf. “One can’t rule out a higher bid though the price is already above where it should be fundamentally.”
Repower had a market value of €219 million when it first sold shares to the public in March 2002, less than a fifth of the company’s current valuation.
Tanti said the global market share of Suzlon was around 11% and, if successful in acquiring Repower, that would go up to 14.5%. Suzlon’s bid coincides with a global surge in wind-power projects as governments seek to cut carbon emissions and reduce dependence on oil and gas. The Paris-based Areva, which became a Repower investor in 2005, plans to use its network of utility customers to drive sales of wind turbines.
Increasing demand enabled Repower, Germany’s third-largest maker of wind-power equipment, to post a nine-month profit of €1million. It had incurred a loss of €8.3 million a year earlier. Suzlon sees funds from internal accruals and debt from a consortium of banks, including ABN Amro and Yes Bank Ltd. Mortifer also has an option to buy Suzlon’s stake, said Chief Financial Officer Eduardo Rocha.
Gautam Charkavorthy and Thom Rose of Bloomberg contributed to this story