CNOOC bid for CSIQ for $300 mln
Oil company wants to get into PV
China National Offshore Oil Corp (CNOOC) is in talks with CSIQ for a buyout of Canadian Solar (CSIQ) at a price tag of $300 mln, according to news report in China. Currently CSIQ has a market cap of $142 mln - so CNOOC is offering 100% premium. CNOOC's high profile bid is another example that solar power has been accepted as a mainstream energy source.
Last year, France's Total bought a controlling stake at Sun Power. Before that, in 2010, Korea's Hanwha bought a 50% stake in China's module maker, Solarfun (SOLF). Solarfun subsequently changed its name to Hanwha SolarOne (HSOL). The stock price of the two solar companies have dropped significantly after the outside investment.
Before the CSIQ bid, this Feb CNOOC announced a joint venture with Spain's Isofoton - intending to enter the solar cell manufacturing and downstream development. Besides CNOOC, several other national energy and chemical companies also are interested in the PV industry. SinoPec, one of the two oil duo-poly in China already started building a solar farm at its Tahe oil field. Another giant, SinoChem, also planned to build an integrated PV manufacturing company. China Ocean Aviation Group (COAG) is closely watching too.
The main concern for the M&A activity in the solar space is the overcapacity which drives down the module ASP sharply since mid last year. Most manufacturing companies in the industry are operating at a loss right now. Another hurdle is the relatively high level of debt for most of the top PV companies in China despite the low market cap. For example, CSIQ has short term borrowings and long term debt totaling $1.1 bln while its market cap is a paltry $142 mln as of 2011-04-13. Still, CSIQ is a good takeover target for solar M&A as it executed very well in 2011 and grew its shipment and market share significantly. Its debt seems not a big issue for the deep-pocket CNOOC.
But CSIQ is likely to reject the deal and wants a higher price. Now it is obviously the low point of the industry cycle, so CSIQ won't be satisfied with a $6-7 per share offer as its share traded above $10 most of the time during its 5-years history. Former SOLF founder, Lu Yonghua sold his SOLF stake at a nice price and received praises from industry observers. It would be interesting to see whether CNOOC and CSIQ can reach a deal this time.
