Sunways succumbs to LDK Solar offer bid

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In the first of what the financial community believe could become a wave of consolidations, especially in the German solar market, LDK Solar is acquiring Sunways. With the majority of the PV industry battling overcapacity and falling prices, while subsidies continue to be cut, many publically traded firms have seen share valuations plummet in 2011, offering further attraction to potential buyers with sufficient cash resources. Sunways had been using LDK Solar for wafer and certain module assembly tasks, though this had led to an inventory write-down of €3.8 million in the third quarter, due to falling prices.

Initially, LDK Solar acquired a 33% stake in Sunways via a capital increase announced on January 31, 2011, by the German firm. The deal included 1,158,845 new shares being issued, valued at approximately €2.2 million and purchased by LDK Solar’s German subsidiary, LDK Solar Germany Holding GmbH.

However, a total of 5.79 million new shares of Sunways were issued against the cash contribution and contributions in kind, which on a technical level gives Sunways certain ownership rights of an unidentified LDK module manufacturing plant in China.

“We are investing in Sunways because we are convinced of the synergies of our two companies in light of our and Sunways' products and business models,” commented Xiaofeng Peng, chairman, CEO and founder of LDK Solar. “We also believe in the market potential of the Sunways brand. This is a perfect match for both sides.”

“We are happy that we have found in LDK a strategic anchor investor who shares our vision of the photovoltaic future and with whom we were able to develop over many years of intensive cooperation a relationship of trust with the highest appreciation and respect,” added Michael Wilhelm, CEO of Sunways in a statement.

A voluntary public takeover offer for all outstanding shares in Sunways at €1.90 per share has been offered by LDK, valued at approximately €22 million. The entire transaction is expected to be completed in the first quarter of 2012

According to the companies, Sunways will have access to LDK Solar's module production plants in China for the further joint development of high-performance solar modules.

Sunways and LDK Solar said that a long-term wafer supply contract between the companies had been terminated but could potentially be reinstated if the capital increase should fail to be registered with the relevant German governmental authorities by June 30, 2012, though this is believed to be highly unlikely.

Sunways shares are expected to continue to be traded on the Frankfurt stock exchange. Sunways recently reported that it expected 2011 revenue of €100-€120 million on losses in the lower double-digit million range. Losses have been reported for three consecutive quarters.

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