Suzlon bags REpower, scrip soars

In a unique deal, wind turbine maker Suzlon Energy has managed to gain control of over 60 per cent of Germany-based REpower's equity through an agreement with its shareholders, French nuclear energy company Areva and Portugal's Martifier.

Both Areva, which holds 30.17 per cent of REpower's equity, as well as Martifier, which owns 23.08 per cent, have conceded their voting rights to Suzlon.

Areva gets the right to sell its stake to Suzlon after a year at a price that will be determined by a Suzlon-appointed third party assessor at the time of the sale.

The Pune-based company also has the option of buying the holding of Martifier, its ally in the bid to acquire REpower, after two years for ¤265 million.

"The structure of the agreement gives us majority voting rights while deferring cash flow," said Suzlon Chairman Tulsi Tanti, who personally owns 8 per cent of the company.

Areva yesterday retreated from its attempt to buy REpower saying the price was too high. It had until today to top Suzlon's ¤1.35 billion ($1.8 billion) offer.

The triumph of Suzlon, which becomes the fourth-largest wind power company in the world, was greeted with cheer from the stock market, which pushed its stock up a record 18.94 per cent to Rs 1,378.45 at close on the Bombay Stock Exchange.

Suzlon last month bought 7.84 per cent of REpower for ¤100 million from the open market at ¤150 per share. Tanti expects to gain 75 per cent control of REpower by next week after paying an additional ¤150 million to buy REpower shares that may be tendered to it.

He said the deal would give Suzlon "access to technology which would have taken us 3-4 years to obtain and also access to markets in the US, Europe and Australia".

Suzlon's victory comes at a time of a global surge in wind power projects, as governments seek to address concerns on global warming and reduce dependence on oil. Europe accounts for half of the world's wind energy market.

Tanti and another Suzlon executive will soon join the REpower board.

Suzlon will pay Areva and Martifer largely through debt raised for the acquisition and some internal accruals.

It has already locked in ¤626 million in debt from ABN Amro Bank and raised $300 million through an issue of foreign currency convertible bonds.