29 May 2007 – Suzlon of India has emerged the victor in the bid battle for German wind power group, Repower, after the spiralling cost of a takeover forced France’s state-owned nuclear group Areva to back down.
Suzlon’s victory, with a cash offer of €1.2bn ($1.6bn), marks only the second contested bid battle by an Indian company in Europe and will reinforce its position as one of the world’s leading suppliers of wind turbines at a time when the market is growing rapidly. However, according to a report by London’s Financial Times, it also deals a severe blow to Areva’s ambitions to become a global operator in renewable energy beyond nuclear power.
Areva executives laid the blame for the decision to pull out of the race on the previous government of Jacques Chirac, and in particular on former finance minister Thierry Breton, whose relationship with the nuclear group’s boss, Anne Lauvergeon, was notoriously difficult. “We lost a lot of time as a result,” said one senior executive.
While Areva sought to convince France’s outgoing and incoming governments of the need to win the battle, Repower shares had increased from about €130 at the start of May to as high as €168 on Thursday, when Areva pulled out. “We were not going to go ahead at any cost,” the Areva executive said. “It was not pragmatic.”
The group insisted it had won the support of the new government of President Nicolas Sarkozy last week. However, it had decided to call a standstill given the rising financial cost.
Areva also claimed a victory by negotiating with Suzlon a guaranteed profit of more than €350m for its 30 per cent stake in Repower shares should it decide to sell. However, insiders noted that this gain will average out at less than €150 a share the Indian company is paying for the German group.
Areva’s gain will be equal to a fourfold profit on its initial investment in Repower some years ago, the group said. The put option was subject to a time limit, but the duration was not specified. Suzlon and Areva have also struck a deal whereby the latter’s transmission and distribution division will become a significant supplier of the Suzlon’s wind power projects.
Areva said that it intended to remain a shareholder in Repower and has agreed to cast its votes with Suzlon. However, it is not likely to hold on to its stake in the long term. The group is expected to turn its attention to other acquisition opportunities, and may need to sell to fund any purchase.
The bid battle for Repower was launched by Areva in January, when it bid €105 a share to acquire majority control.
Within weeks Suzlon trumped Areva’s offer by joining forces with Martifer, Repower’s second biggest shareholder, with an offer of €126. Offers were subsequently increased to €140 and €150 respectively.