The ailing Danish wind giant Vestas is target for a take over by the much smaller Chinese Ming Yang. It is the Danish tabloid newspaper Ekstra Bladet who breaks the story. According to sources close to the process, Ming Yang talked about a takeover at a meeting last week in Hamburg.
Buying Vestas’ debt
Ming Yang has realised that the structure of ownership, with thousands of small shareholders, makes a normal takeover very difficult. The strategy supposedly is to buy Vestas’ huge debt, and try to get control of the company by the back door.
With a market share of only 3.2 percent in 2010 compared to Vestas’ 15.5 percent it is the mice planning to takeover the elephant, but with a credit of DDK 30 billion (US$ 5 billion) from China Development Bank, Ming Yang might be able to do it. Vestas’ Market value is only DDK 8 billion equal to 0.4 price/book value. Vestas’ long term liabilities are DDK 34 billion.
Vestas negotiating with Mitsubishi
While the Chinese plans to get control of Vestas, the company itself desperately seeks new capital. They are negotiating a strategic pact with Japanese Mitsubishi, which may end up with an off shore joint venture. The two companies might be able to benefit mutual from cooperating.
Mitsubishi earlier this year lost a patent battle to General Electric, making life difficult for the Japanese on the important American market. At the moment Mitsubishi is not able to deliver to their American customers, but Vestas has lot of capacity in US and no patent issues.
Vestas has most to gain
Jacob Pedersen, an analyst at Sydbank, said that Denmark’s Vestas potentially has the most to gain from any joint venture.
“If Vestas could move a lot of debt from their balance sheet to a joint venture that would make a lot of sense,” he said.
“One of the issues surrounding the company is the indebtedness and if [debt] covenants are being breached, so it would be an advantage moving some of the debt to another company.”
As both companies look to expand business at sea, tying the knot in an offshore joint venture would be the most likely outcome of an agreement, he said.
“They are both developing offshore turbines. Vestas has ground breaking technology as I understand it, which is very expensive, and Mitsubishi’s technology is not nearly as good. Mitsubishi has the money and capital and [would] get the technology in return,” Pedersen said.
However, Pedersen said that any partnership would likely be destined to operate in the offshore-wind market only, and only as a joint venture, which would be set up as separate company.