Thesolarindustry has been awash with buzz about Robert Bosch's acquisition of Ersol Solar Energy.
After all, if the deal goes through, it will represent the largest solar buyout so far and the first one worth more than $1 billion, according to Daniel Englander, an author of Greentech Media's Green Light blog. Bosch said Monday it intends to pay €1.08 billion ($1.67 billion) for the German solar-cell maker.
But is Ersol worth that price? Bosch's offering price is 63 percent higher than the value indicated by Ersol's closing price on Friday. The price also is about 21 times Ersol's projected 2009 earnings per share, said Reuters Estimates.
At that price, "I think they are paying a premium," said Paula Mints, solar power analyst at Navigant Consulting.
Bosch, better known for being an automobile parts supplier than its work in renewable energy, said it has signed an agreement with investor Ventizz Capital Partners to acquire a 50.45 percent stake in Ersol for €546.4 million ($849.21 million), or €101 ($157) per share. Ersol trades on the Frankfurt Stock Exchange under the ticker "BS6." Ersol's stock skyrocketed 61.3 percent to close at €100.15 ($155.72) per share Monday.
Bosch also said it intends to buy the rest of Ersol shares at the same price.
Robert Bosch is part of the Bosch Group, which has invested in renewable energy products. One of Bosch Group's subsidiary makes solar-powered water heaters and other heating products. The Ersol acquisition reflects Bosch's strong interest in expanding its renewable energy portfolio.
But just because Bosch might be paying a high price, it doesn't mean it's not a good deal, Mints said.
"Right now the (solar) market is booming. There is no real downside to buying in a market that is continuing to expand," she said.
A bigger issue is whether Bosch, an automotive parts supplier, will invest enough money to support Ersol's research, development and manufacturing, Mints said.
If Bosch can square up the deal it will help the company break into the manufacturing of traditional silicon-based solar cells, she said.
Ersol also is developing thin-film panels, which use little to no silicon.
Ted Sullivan, a senior analyst for Lux Research, said the deal is an early sign of a trend that will likely start in 2009, when the silicon shortage is expected to end and the market could be flooded with more solar panels than it demands (see Thin Film to Survive Solar Shakeout, Solar Sector Heading for a Shakeout, Silicon Still a Hot Topic at Photon and Solar Margins About to Shrink?).
As valuations drop, solar companies could become cheaper acquisition targets for large engineering and manufacturing firms looking to diversify their holdings, Sullivan said. He doesn't expect buyers to go after large companies such as Q-Cells, however, noting that Q-Cells would be come with a hefty price tag.
Q-Cells' (Frankfurt: QCE) first-quarter earnings beat analysts' expectations, while Ersol missed the mark (see Solar Firms Shine in 1Q).