Bloomberg News

AMSC Acquisition of Switch Canceled After Shares Plunge 82%

October 31, 2011

(Updates with closing share price in fifth paragraph.)

Oct. 31 (Bloomberg) -- American Superconductor Corp., a U.S. maker of wind-turbine components and power cables, canceled a deal to buy Finland’s The Switch Engineering Oy, citing “adverse market conditions.”

AMSC will lose a 14.2 million euro ($20 million) advance payment to The Switch, the Devens, Massachusetts-based company said today in a statement. Terminating the deal will have “no other impact” on its finances, Jason Fredette, a spokesman, said today in an interview.

Arranging financing to close the cash-and-stock purchase became a “distraction” for AMSC after its share price plummeted, Craig Irwin, an analyst at Wedbush Securities Inc. in New York, said today in an interview. Terminating the deal will let the company develop its wind business, he said.

“It’s a good thing because they will be focusing on making their core business profitable,” said Irwin. “They really need to get back to their knitting.”

AMSC has dropped 82 percent since April 5, when its largest customer, Chinese wind-turbine maker Sinovel Wind Group Co., refused to accept contracted shipments. AMSC fell 2 percent to $4.36 at the close in New York.

“They need to still clean up the mess from Sinovel,” said Irwin.

AMSC’s shares closed at $23.19 on March 14, the day it announced plans to to pay 190 million euros in cash and stock for The Switch. The purchase would have delivered the Finnish company’s low-speed permanent magnet generator designs for turbines without gearboxes that may improve efficiency and require less maintenance.

Superconducting Operations

AMSC also makes superconducting power cables and Irwin said it may be considering selling those operations. “They’re trying to focus on wind and consolidate assets on where they can serve the industry profitably,” he said.

The superconducting cable business may be a tough sell because other companies offer more competitive products, Irwin said.

AMSC is “highly focused on superconducting wire,” said Fredette, who wouldn’t say whether the company is considering selling any of its operations.

The purchase of The Switch was initially expected to close by Aug. 31 and AMSC extended that in June to Sept. 30, with the option of two additional 30-day extensions.

--Editors: Will Wade, Jasmina Kelemen

To contact the reporters on this story: Christopher Martin in New York at cmartin11@bloomberg.net; Ehren Goossens in New York at egoossens1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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