Shares of Power-One Inc. soared 57 percent on Monday after Swiss industrial giant ABB Ltd. said it signed a deal to buy the Camarillo power-conversion technology company for roughly $1 billion.
ABB said it would pay Power-One shareholders $6.35 a share, a 57 percent premium to the company’s closing price on Friday. Silver Lake Sumeru, which controls more than 14 percent of Power-One’s shares and is its largest shareholder, agreed to vote in favor of the transaction, according to the announcement.
Power-One, founded in 1973, had its roots as a maker of power converters for computers, electronics and appliances, but in recent years expanded into the alternative energy sector, becoming the second-largest maker of solar inverters. The devices enable solar power to be channeled from photovoltaic solar panel installations to power grids. ABB is considered the world's biggest supplier of power grids and industrial motors.
While the cost of solar cells and panels has fallen, hurting makers of those products, solar inverters have largely maintained their value because of the relatively complex technology involved. The solar inverter market is forecast to grow by more than 10 percent per year until 2021, said ABB, which believes the solar market overall is poised to grow its way out of overcapacity, fueled by growing demand from emerging markets such as China and the Middle East. About 70 percent of Power-One's inverter business now is in Europe, which is seen as a declining market.
"The market is very tumultuous for solar overall and wind power, but I really feel the strong big disrupters in energy market in the next 10 years are going to be shale gas and photovoltaic power," ABB Chief Executive Joe Hogan said in a conference call.
Despite the high premium, analysts said that if ABB’s premise is correct, the purchase price is reasonable given Power-One’s lack of debt, positive operating cash flow and $266 million cash in the bank. Power-One employs nearly 3,300 people in the U.S., China, Italy and Slovakia.
“Power-One’s power solutions business should dovetail nicely with ABB’s existing and broad power conversion business,” Carter Driscoll, analyst at Ascendiant Capital Markets LLC in Irvine, said in an investor note. “ABB also sells some solar inverters, and Power-One’s product lines should bolster its presence substantially in renewable energy markets.”
Power-One shares closed up $2.29, or 57 percent, to $6.33 on the Nasdaq.