If you're looking to invest $1 billion, you might not think to put it in an industry bedeviled by bankruptcies. But that's what Swiss industrial conglomerate ABB is doing.
It's spending about a billion dollars (£656 million) to acquire a company in the solar industry, Reuters reports. Yes, the solar industry, where companies have been going bust for a couple years with nearly sunset regularity - including last month's demise of the world's previous leading solar panel maker, .
For a cool 10-figure price tag, ABB is taking over Power-One Inc., a Camarillo, Calif. maker of - if you're looking for sexy, then go somewhere else - inverters.
The unheralded devices convert direct current generated by photovoltaic gear into alternating current required by the electricity grid. They are more complex than other solar gear such as easy to replicate solar cells and panels, so inverter companies have not suffered as much as other segments have, Reuters notes. ABB is "betting that growth in emerging markets will revive a sector ravaged by over-capacity and weakening demand in recession-hit Europe," it adds.
The Swiss company believes that the rising cost of other forms of electricity combined with the plummeting price of solar panels will buoy the market, especially in China and the Middle East.
ABB obviously hopes it's betting correctly. At $6.35 per share, ABB's takeover price is 57 percent above Power-One's closing price last Friday. Power-One had sales of about $1 billion last year but reported a fourth quarter loss, according to Reuters (the BBC notes that 2012 profits were $120 million). It has 3,300 employees and has doubled its market share to 10 percent since 2009, emerging as the industry's number two behind a slipping SMA Solar, which is down to a 25 percent share from an earlier 38 percent.
The deal would close in the second half, pending shareholder approval.
Photo from Power-One
Trouble at the top:
This post was originally published on Smartplanet.com