Looking at growth in the solar industry, industrial giant ABB will pay $1 billion to pick up U.S. solar energy company Power-One Inc.
The world’s biggest supplier of industrial motors and power grids said Monday it had agreed to pay $6.35 per share in cash for Power-One, the second-largest maker of solar inverters that allow solar power to be fed into grids.
The offer price is 57 percent above Power-One’s closing price on Friday, boosted by $266 million in net cash held by debt-free Power-One.
As solar power gets closer to competing with conventional forms of energy such as gas and coal, demand for solar panels that harness the sun’s energy is rising.
The same goes for solar inverters, which feed that power into large electricity grids from commercial solar panel installations and smaller units on factories and homes.
The solar inverters business is one of the last profitable parts of the solar value chain — mainly due to its relatively complex technology — while makers of cells and panels have suffered massively from the fact their products are easy to replicate.
Germany’s SMA Solar, the world’s biggest maker of the components, reported a 58 percent drop in 2012 operating earnings last month and said sustained lower prices from competitors could severely impair its business.
ABB believes the solar market is set to grow its way out of overcapacity as electricity costs rise and falling prices of solar power systems make it a more competitive source of energy.
ABB is buying into solar energy now because it sees a shift in demand toward emerging markets such as China and the Middle East, said Ulrich Spiesshofer, head of ABB Discrete and Motion, the business that includes ABB’s solar activities.
The company took a 35 percent stake in Germany’s Novatec Solar in 2011.
“Solar is, long-term, the fastest-growing renewable generation market in the world. ABB believes in this market,” Spiesshofer said.
The solar inverters market is forecast to grow by more than 10 percent per year until 2021, ABB said. Solar inverter industry revenues reached $7 billion last year, according to research firm IHS.
Camarillo, California-based Power-One’s market share in the inverter industry has doubled to 10 percent since 2009, while SMA Solar’s has dropped to 25 percent from 38 percent, ABB said.
ABB Chief Executive Joe Hogan said the deal should boost net income within a year. He said the company had no interest in buying solar panel or machinery makers.
The deal should close in the second half of 2013.
Power-One employs almost 3,300 people, mainly in China, Italy, the United States and Slovakia and had sales of around $1 billion in 2012. The firm posted a fourth-quarter loss per share in January.