MEMC is one of the larger makers of silicon wafers in the world.  Confronted with stiff competition in its core business, MEMC has made a number of strategic investments and acquisitions to bolster its market position.

Today the firm announced the acquisition of Solaicx for $66 million in cash, plus the potential for $37.6 million in additional money and earn-outs based on meeting performance targets.  

Solaicx has developed continuous crystal growth manufacturing processes which yield low-cost, high-efficiency monocrystalline silicon wafers for the photovoltaic market. The Solaicx technology allows for high-volume crystal growth compared to the silicon ingots produced in the traditional precision semiconductor manufacturing process.  Solaicx has approximately 80 employees and a large-scale production facility in Portland, Oregon.

This type of technology seemed brilliant when silicon was at record-high market prices a few years ago.  It's a little less attractive when prices are low, hence the relatively low acquisition price -- at least compared to the amount of VC funding put into the company.  Solaicx had raised over $50 million in VC funding from D.E. Shaw, Applied Ventures, Big Sky Ventures, Firsthand Capital Management, Labrador Ventures and Greenhouse Capital Partners.  This is hardly the multiple upon which venture capital careers are based. It counts as a relatively successful exit but is indicative of the currently sluggish M&A rewards in solar and the realities of the commodity-electron energy business.

MEMC bought SunEdison for $200 million in cash and stock in October of last year, enabling it to own a part of the higher margin downstream market.  And the firm also invested in solar financier, PPA provider, and project developer Tioga Energy in December of last year.

MEMC is benefiting from the need for VC-funded solar firms to reach some type of liquidity event and it's using its cash reserves to buy revenue-generating firms in strategically placed parts of the solar ecosphere.  The Solaicx acquisition is much more in line with MEMC's traditional business versus its recent forays into the downstream sector. 

Expect to see more acquisitions along these lines as the solar market consolidates.  MEMC's stock prices nudged less than 1 percent higher as of the writing of this article.


Jeff Osborne of Thomas Weisel had this to say:

"We view this acquisition as a positive as it positions MEMC for cost leadership and accelerates management's plans to have 600MW of multi and mono wafering capacity to come online late this year, a move we view as key for the company's profitability going forward capturing incremental margin as well as increasing controls over wafer quality.  With this acquisition, we would expect capacity at Solaicx to expand quickly and we continue to see MEMC growing overall internal wafering capacity to about 1.5GW in 2011 and up to 3GW in 2012 which we believe will aid margins longer term. Additionally, Solaicx's Continuous Czochralski ingoting process is ideally suited for the Fluidized Bed Reactor silicon MEMC produces in Texas utilizing high purity silicon. We will adjust our estimates following the closing of the transaction, expected to close by the end of June 2010, however MEMC management did note it expectsthe transaction to be accretive to earnings in 2011."