Suzlon ups bid for REpower to euro 150 a share

Wind energy major Suzlon Energy Ltd has raised its bid for German wind turbine-maker REpower Systems AG to euro 150 per share from its earlier offer of euro 126 made in February this year.

By increasing its offer by more than 19 per cent, Suzlon has topped the March 15 offer of euro 140 per share made by French nuclear power company Areva, which owns a 30 per cent stake in REpower.

Suzlon secured 7.7 per cent of REpower's share capital after SE Drive Technik GmbH, its subsidiary, paid euro 150 per share for 627,000 REpower shares over the Easter holidays.

As part of Suzlon Wind Energie, its joint bid vehicle with Portuguese company Martifer, Suzlon already shares the 25 per cent stake that Martifer has in REpower. However, this is the first time that a Suzlon subsidiary has picked up a stake in REpower. This will become a part of the joint bid vehicle and push Suzlon Wind Energie's stake in REpower to 32.7 per cent.

Suzlon's revised offer will value REpower at around euro 1.23 billion ($1.65 billion). The offer date for REpower shareholders to accept the revised bid is April 20. In the event of Areva raising its offer price, the response period would be extended by two weeks, Suzlon said.

"We will revise our bid only till our internal valuation of REpower is not over-shot," said Vivek Kher, head of corporate communication at Suzlon.

If Suzlon manages to acquire the remaining REpower shares, the company expects a payback in five to six years from the time of the takeover.

Suzlon has already locked in euro 1 billion of debt from ABN Amro in case of a 100 per cent acquisition. However, if it were to acquire only 70 per cent shares of REpower, it would need to borrow euro 626 million.

Industry analysts feel that the revised offer would erode the company's earnings per share (EPS), but Suzlon officials felt it would actually be EPS accretive.

Suzlon's share price fell 1.14 per cent to Rs 976 on the Bombay Stock Exchange today after the revised offer was announced, later rising to Rs 988.90.

"The acquisition did not have any effect on the financial results for 2006-07. However, for the year ending March 2008, the debt to equity ratio would be 1:1.45 in case of a 100 buy-out, 1:1.2 for a 70 per cent stake and in case of a 51 per cent controlling stake, it would be 1:1.05," said Kher.