This is an excerpt from an article I originally published on Seeking Alpha on January 3, 2012. Click here to read the entire piece.)
LDK seems to have a penchant for starting the year with big announcements. Last year, the company significantly increased sales guidance. This year, LDK comes out the gate announcing a bid to acquire German photovoltaic company Sunways, a small producer of solar cells, modules, and inverters. Bloomberg provides some details of the deal and analyst commentary regarding the likely motivations and results for the deal in “LDK Solar Enters German Market, Adds Technology With Sunways Bid.” I was very intrigued by the deal because LDK is so much larger than Sunways, and Sunways is now a money-losing company in sharp decline. LDK recorded $472M in sales in last year’s third quarter and $499M in sales the previous quarter. Sunways suffered a 50% drop in sales in the first three quarters of 2011 compared to the same quarters in 2010; sales in the third quarter were all of €23.3M, about $31.5M at the time. Sunways suffered operating losses for the first three quarters of 2011 (fourth quarter results are not yet available). The market access and technology that Sunways offers LDK must be extremely valuable because the company is clearly becoming distressed based on its last earnings report for the third quarter 2011.
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Sunways provided very poor guidance for the fourth quarter with low margins, negative EBIT, and depressed sales continuing. An acquisition by LDK will likely give Sunways some relief from the pressures on its balance sheet, but I am always circumspect when a company takes over one of its customers. I am hoping this year’s big news turns out a lot better than last year’s.
Source: Deutsche Börse Group
Be careful out there!
This is an excerpt from an article I originally published on Seeking Alpha on January 3, 2012. Click here to read the entire piece.)
Full disclosure: long LDK