Bucking a trend sweeping the globe’s solar manufacturers — a trend it had flirted with — Canadian Solar has rejected an offer from its Chairman, President, and Chief Executive Officer, Dr Shawn (Xiaohua) Qu to take the company private.
Over the past two years, and as recently as last month, solar manufacturers of various stripes have been taking themselves private by de-listing from the NASDAQ stock exchange. Specifically, according to Jenny Chase, head of Solar Analysis at Bloomberg New Energy Finance, “Being listed in the US is expensive, they cannot easily sell in the US thanks to the trade wars, the US isn’t a major market anyway, and if they did want to be listed, they might well get a better valuation elsewhere.”
So far, we have seen Trina Solar, China-based PV manufacturer ReneSola, and Shanghai-based solar cell and module manufacturer JA Solar all take themselves private, followed late last month by Korean solar PV company Hanwha Q CELLS.
However, Canadian Solar revealed on Monday that it would buck this trend, announcing that it had recommended against accepting Dr Qu’s offer, which was made in December of 2017. “I believe that my proposal of US$18.47 in cash per Common Share will provide a very attractive opportunity to the Company’s shareholders,” Dr Qu wrote in his proposal letter at the time. “This price represents a premium of approximately 7.1% to the Company’s closing price on December 8, 2017, and a premium of approximately 10% to the average closing price during the last 90 trading days.”
However, the special committee formed to review the offer were not as impressed, pointing to “the length of time that has passed since Dr. Qu submitted the Proposal Letter, the significant changes that have taken place in the solar industry during that time, and the uncertainty surrounding Dr. Qu’s ability to secure the financing required to enable him to make a fully-financed offer” as reasons why they would decline the offer. Specifically, according to the company’s press release, the special committee “decided to recommend to the Board that the Special Committee be dissolved and that the Board cease its review of the Proposed Transaction and not undertake a review of any future “going private” transaction proposed by Dr Qu unless the Board receives reasonable evidence that the proposed transaction is fully financed.”
Dr Qu immediately withdrew his Proposal Letter and Proposed Transaction, but he advised the Board that he nevertheless remains interested in acquiring the company in a “going private” transaction and that, “subject to any restrictions or limitations under applicable law, he may continue to explore ways to secure adequate financing and propose another acquisition transaction to the Board.”
As to why Canadian Solar has decided to buck conventional wisdom and the trend towards taking solar manufacturing companies private, Jenny Chase wonders whether Canadian Solar is not as representative of its peers. “Canadian Solar is a lot less ‘Chinese’ than other solar companies with manufacturing in China,” Chase explained, referring to its obvious base outside of China. “China represented only 25% of its revenue in 2017, the Americas 33%. It may, therefore, feel it has more to gain from visibility on the Nasdaq than others, in terms of branding.”
Further, according to Chase, “The Chinese market slammed the brakes on in May, possibly making the firm more keen to avoid anything that might negatively impact non-Chinese sales.”