Vestas Wind Systems A/S (VWS) surged 13 percent, the most in 2-1/2 months, after Danish Energy Minister Martin Lidegaard said the government wouldn’t block a possible bid for the world’s largest wind-turbine maker.
“What’s going on is in the private market,” Lidegaard said at a press conference in Copenhagen when asked whether the government could stop a purchase by a Chinese company. “There’s no question that the Danish government would interfere. It’s a private business.”
The Chinese turbine makers Sinovel Wind Group Co. (601558) and Xinjiang Goldwind Science & Technology Co. are considering a bid for Aarhus, Denmark-based Vestas, the newspaper Jyllands-Posten reported today, citing unidentified people it said were close to the process.
All three companies are struggling with declining turbine prices, excess production capacity and efforts by governments from the U.S. to Germany to rein in support for renewable energy. Goldwind said April 13 that its profit might be wiped out in the first quarter, and Sinovel’s net income dropped 73 percent last year.
“Vestas has a significant order pipeline, brand and product technology, which makes it a company with substantial potential and therefore we believe there would be several interested financial, strategic or sector buyers,” Rupesh Madlani, an analyst with Barclays Capital in London, said in an e-mail.
“Despite these advantages, we see an acquisition of any turbine equipment company as carrying significant operating, execution and financial risk,” Madlani said, noting that the purchase of a minority stake in Vestas or a technology partnership were more likely outcomes.
“We doubt that a bid will materialize,” said Patrik Setterberg, an industry analyst at Nordea Bank AB (NDA), which helped manage Vestas stock offerings in 2006 and 2009. “Both companies are dealing with the same problem as Vestas -- low earnings margins and pressure on cash flow. We believe that Sinovel and Goldwind are more interested in consolidating its home market before making acquisitions beyond China.”
Guo Sho, an analyst at Barclays Capital Asia Ltd. in Hong Kong, said any takeover would be “very messy, slow and may involve the Chinese government.”
“We’ve always seen a strategic partnership as a more likely scenario with Vestas,” Sho said.
Vestas climbed as much as 22 percent, the largest gain since August, and closed 13 percent higher at 55.55 kroner, the most since Feb. 3. It was the biggest gainer on the Copenhagen 20 Index, which rose 1.1 percent. The stock is down 71 percent in the past year after today’s surge.
Several Danish corporate finance bankers discussed the matter with the two Chinese companies after Vestas’s share price collapsed amid disappointed expectations for its business, management problems and price pressures on the wind turbine market, according to the newspaper report.
Vestas Chief Executive Officer Ditlev Engel declined to comment on the possible bids by Sinovel and Goldwind in an interview in Copenhagen.
Goldwind said it wouldn’t comment on market rumors, and a call and e-mail to Sinovel’s media manager Xiao Qiang weren’t answered.
Vestas twice cut earnings forecasts in the past year, and Chairman Bent Erik Carlsen and Chief Financial Officer Henrik Norremark quit. It’s cutting 2,335 jobs and reorganizing to become a “leaner” business.
Last week, Vestas fell to the lowest in almost nine years after Morgan Stanley and Jyske Bank A/S (JYSK) cut their price targets.
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