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Solar manufacturer Hanwha Q CELLS inks go-private deal with parent

Hanwha Q CELLS Co. Ltd. said Oct. 15 that it agreed to go private through a deal with its parent company that gives the South Korean solar panel manufacturer an equity value of about $825 million.

Under the going-private transaction with Hanwha Solar Holdings Co. Ltd., each American depositary share in Hanwha Q CELLS will be canceled in exchange for the right for holders to receive $9.90 in cash, a 50% premium to the stock's closing price on Aug. 2, the day before the proposed deal was announced.

Hanwha Solar, a subsidiary Hanwha Chemical Corp., already owns nearly 94% of Hanwha Q CELLS' outstanding shares, so a shareholder vote is not required to approve the deal, Hanwha Q CELLS said. Hanwha Q CELLS, which is incorporated in the Cayman Islands, expects the merger to close in the first quarter of 2019.

A wave of privatizations in the solar manufacturing sector has been building for more than a year, with companies likely motivated by the belief that they were undervalued on U.S. exchanges or by a desire to avoid the scrutiny of public markets, analysts say.

Hanwha Q CELLS reported a second-quarter net loss attributable to ordinary shareholders of $41.3 million compared to net income of $18.7 million a year earlier. Company Chairman and CEO Seong Woo Nam blamed the results on a drop in global demand due to U.S. import tariffs and policies in China that were designed to slow the pace of development there in order to reduce subsidy costs.

Hanwha Q CELLS generated approximately 41% and 17% of its revenue from the U.S. and China, respectively, in 2017, according to an annual filing with the U.S. Securities and Exchange Commission.

"Industry consolidation has been slow primarily due to protectionist policies that helped to sustain otherwise unsustainable company operations," Nam said on an earnings call Aug. 13. "As one of few profitable solar module manufacturers, we welcome another round of industry consolidation as we will continue to streamline our operation by discontinuing unprofitable operations, reducing [operating] expense and expanding our footprint in profitable markets."

Hanwha Q CELLS reported a 2017 net loss of $12.4 million. Accounting for foreign currency and pension adjustments, the company said it had comprehensive net income attributable to shareholders of $47.3 million.

Before the deal with Hanwha Solar was announced, Hanwha Q CELLS' stock price was down 8% in 2018. Since the merger was disclosed, the company's shares have risen by 46%, to $9.67 at around 2:30 p.m. ET on Oct. 16.