In the first big merger news of the week, on Monday the boards of Zurich-based engineering company ABB Ltd. (ABB) and Power-One Inc. (PWER) have agreed to terms in which ABB will acquire renewable energy company Power-One for $6.35 per share in cash or $1.028 billion. The deal includes Power-One’s net cash of $266 million and is expected to close in the second quarter, pending customary approvals.
The price is a 57 percent premium to Power-Ones closing price of $4.04 on Friday.
ABB is the world’s largest provider of power grids and industrial motors, while Power-One is the second biggest manufacturer of solar inverters on the planet, creating a solid synergy for the combined firm as ABB bets that solar power will surge in the future in emerging markets and debt-riddled Europe as a way to combat rising traditional energy costs. Camarillo, California-based Power-One has a global footprint with employees in several countries, including the U.S., China, Italy and Slovakia. They produce solar inverters ranging from residential to utility applications.
German-based SMA Solar is currently the world’s largest maker of solar inverters.
Solar inverters are the “intelligence” technology behind solar photovoltaic systems. They allow solar power to be fed into electric grids.
“Solar PV is becoming a major force reshaping the future energy mix because it is rapidly closing in on grid parity,” said Joe Hogan, chief executive at ABB.
Grid parity refers to a point where means of alternative energy are the same price, or less expensive, than prices for purchasing power from today’s conventional electrical grid. Years of commercialization and falling solar production prices are pushing solar energy closer to grid parity.
“The combination of Power-One and ABB is fully in line with our 2015 strategy and would create a global player with the scale to compete successfully and create value for customers, employees and shareholders,” added Hogan.
In 2012, Power-One generated sales of about $1 billion, with earnings before interest, taxes, depreciation and amortization of $120 million.
“Together we can better address the growing worldwide demand for innovative, renewable energy solutions and strengthen our global leadership. I believe ABB is the right partner and now is the ideal time for our companies to join forces,” said Richard J. Thompson, CEO of Power-One.
According to research firm IHS, the solar inverter industry hit $7 billion in 2012. ABB said in today’s press that the market is expected to grow more than 10 percent annually until 2021.
Shares of ABB have slipped by 0.4 percent in Monday trading to $21.33 shortly after the opening bell. Shares of PWER gapped ahead near the acquisition price and are holding steady at $6.33. That’s a solid jump for shares of Power-One, but still don’t represent a 52-week high (which stands at $7.16).