Two Chinese firms considering acquisition of Vestas

BusinessWeek reports that Sinovel Wind Group Co. and Xinjiang Goldwind Science & Technology Co. are considering a bid for wind turbine manufacturer Vestas Wind Systems.

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BusinessWeek reported on April 16 that Vestas Wind Systems A/S (Aarhus, Denmark) stock value surged 13 percent after Danish energy minister Martin Lidegaard said the government wouldn’t block a possible bid for the world’s largest wind-turbine maker.

“What’s going on is in the private market,” Lidegaard said at a press conference in Copenhagen when asked whether the government could stop a purchase by a Chinese company. “There’s no question that the Danish government would interfere. It’s a private business.”

According to the report, Chinese turbine makers Sinovel Wind Group Co. and Xinjiang Goldwind Science & Technology Co. are considering a bid for Vestas. All three companies are struggling with declining turbine prices, excess production capacity and efforts by governments from the U.S. to Germany to rein in support for renewable energy. Goldwind said on April 13 that its profit might be wiped out in the first quarter, and Sinovel’s net income dropped 73 percent last year.

“Vestas has a significant order pipeline, brand and product technology, which makes it a company with substantial potential and therefore we believe there would be several interested financial, strategic or sector buyers,” Rupesh Madlani, an analyst with Barclays Capital in London, said in an e-mail to BusinessWeek.

“We doubt that a bid will materialize,” said Patrik Setterberg, an industry analyst at Nordea Bank AB (NDA), which helped manage Vestas stock offerings in 2006 and 2009. “Both companies are dealing with the same problem as Vestas — low earnings margins and pressure on cash flow. We believe that Sinovel and Goldwind are more interested in consolidating its home market before making acquisitions beyond China.”

The report also says that Guo Sho, an analyst at Barclays Capital Asia Ltd. in Hong Kong, said any takeover would be “very messy, slow and may involve the Chinese government.”

Click here for original BusinessWeek report.