Suzlon seeks focus with Senvion sale

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Richard Heap
January 23, 2015
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This content is from our archive. Some formatting or links may be broken.
Suzlon seeks focus with Senvion sale

Let’s go back to last April. French manufacturer Alstom denied reports that it was in takeover talks with US giant General Electric.

What happened next? Well, lo and behold, an official proposal from GE come out six days after Alstom's denial; and, in June, Alstom accepted GE’s offer. It just shows how wary you should be about trusting official denials in such blockbuster deals.

Now it has happened again. Yesterday, Indian manufacturer Suzlon announced a deal to sell German subsidiary Senvion to US private equity firm Centerbridge Partners for €1bn. This comes after years of speculation on Senvion’s future due to Suzlon’s debt problems.

It was a different story from Suzlon at the start of the month, when reports emerged that it was in talks with a large PE house and Chinese firms about selling Senvion. Suzlon called it a “rumour” that was “baseless and false and speculative”. Strong stuff.

Now it has sold Senvion to a large private equity fund, and that denial looks disingenuous. Okay, so the €2.1bn valuation in that story was way off, and we never heard the names of these Chinese firms, but we can be in no doubt that the story was materially true.

Don't get us wrong. We don't expect total openness in such deals. This isn't a nice, fluffy world where people always tell the truth; and we know there are commercial sensitivities around such deals.

Bu there are a couple of lessons in here for companies.

First, Suzlon could have said something bland like it was "exploring options". By choosing to be more forthright it has made it difficult for the market to take future denials from Suzlon at face value. This will make it harder to manage further speculation about its future.

And second, Suzlon can hardly be surprised that people speculated about Senvion. Suzlon spent most of 2014 dangling the prospect of a flotation of Senvion on the London Stock Exchange. If you keep talking about that sort of stuff then you must expect speculation.

But what about the deal itself?

Clearly, Suzlon has taken a hit by selling Senvion at a price that is around 40% lower than it paid for the firm in 2007. Even so, the deal looks like it makes sense. The two firms never looked an easy fit, and Suzlon can now move on and focus on markets including India, where the government has huge plans to invest in wind.

Suzlon has said the sale is part of a strategy to reduce debts and focus on India and the US, as well as the emerging markets of China, Brazil, South Africa, Turkey and Mexico. It will be good for it to gain more focus after its costly Senvion experiment.

The deal should also work for Senvion, which claimed a 5% share of the global turbine market in 2013/14 with sales of €1.8bn. It is profitable, and unshackling from Suzlon should enable it to focus on core products and core markets of Europe and North America.

How Senvion proceeds now will be of greater interest, and we expect more information from Centerbridge in the coming days.

Let’s go back to last April. French manufacturer Alstom denied reports that it was in takeover talks with US giant General Electric.

What happened next? Well, lo and behold, an official proposal from GE come out six days after Alstom's denial; and, in June, Alstom accepted GE’s offer. It just shows how wary you should be about trusting official denials in such blockbuster deals.

Now it has happened again. Yesterday, Indian manufacturer Suzlon announced a deal to sell German subsidiary Senvion to US private equity firm Centerbridge Partners for €1bn. This comes after years of speculation on Senvion’s future due to Suzlon’s debt problems.

It was a different story from Suzlon at the start of the month, when reports emerged that it was in talks with a large PE house and Chinese firms about selling Senvion. Suzlon called it a “rumour” that was “baseless and false and speculative”. Strong stuff.

Now it has sold Senvion to a large private equity fund, and that denial looks disingenuous. Okay, so the €2.1bn valuation in that story was way off, and we never heard the names of these Chinese firms, but we can be in no doubt that the story was materially true.

Don't get us wrong. We don't expect total openness in such deals. This isn't a nice, fluffy world where people always tell the truth; and we know there are commercial sensitivities around such deals.

Bu there are a couple of lessons in here for companies.

First, Suzlon could have said something bland like it was "exploring options". By choosing to be more forthright it has made it difficult for the market to take future denials from Suzlon at face value. This will make it harder to manage further speculation about its future.

And second, Suzlon can hardly be surprised that people speculated about Senvion. Suzlon spent most of 2014 dangling the prospect of a flotation of Senvion on the London Stock Exchange. If you keep talking about that sort of stuff then you must expect speculation.

But what about the deal itself?

Clearly, Suzlon has taken a hit by selling Senvion at a price that is around 40% lower than it paid for the firm in 2007. Even so, the deal looks like it makes sense. The two firms never looked an easy fit, and Suzlon can now move on and focus on markets including India, where the government has huge plans to invest in wind.

Suzlon has said the sale is part of a strategy to reduce debts and focus on India and the US, as well as the emerging markets of China, Brazil, South Africa, Turkey and Mexico. It will be good for it to gain more focus after its costly Senvion experiment.

The deal should also work for Senvion, which claimed a 5% share of the global turbine market in 2013/14 with sales of €1.8bn. It is profitable, and unshackling from Suzlon should enable it to focus on core products and core markets of Europe and North America.

How Senvion proceeds now will be of greater interest, and we expect more information from Centerbridge in the coming days.

Let’s go back to last April. French manufacturer Alstom denied reports that it was in takeover talks with US giant General Electric.

What happened next? Well, lo and behold, an official proposal from GE come out six days after Alstom's denial; and, in June, Alstom accepted GE’s offer. It just shows how wary you should be about trusting official denials in such blockbuster deals.

Now it has happened again. Yesterday, Indian manufacturer Suzlon announced a deal to sell German subsidiary Senvion to US private equity firm Centerbridge Partners for €1bn. This comes after years of speculation on Senvion’s future due to Suzlon’s debt problems.

It was a different story from Suzlon at the start of the month, when reports emerged that it was in talks with a large PE house and Chinese firms about selling Senvion. Suzlon called it a “rumour” that was “baseless and false and speculative”. Strong stuff.

Now it has sold Senvion to a large private equity fund, and that denial looks disingenuous. Okay, so the €2.1bn valuation in that story was way off, and we never heard the names of these Chinese firms, but we can be in no doubt that the story was materially true.

Don't get us wrong. We don't expect total openness in such deals. This isn't a nice, fluffy world where people always tell the truth; and we know there are commercial sensitivities around such deals.

Bu there are a couple of lessons in here for companies.

First, Suzlon could have said something bland like it was "exploring options". By choosing to be more forthright it has made it difficult for the market to take future denials from Suzlon at face value. This will make it harder to manage further speculation about its future.

And second, Suzlon can hardly be surprised that people speculated about Senvion. Suzlon spent most of 2014 dangling the prospect of a flotation of Senvion on the London Stock Exchange. If you keep talking about that sort of stuff then you must expect speculation.

But what about the deal itself?

Clearly, Suzlon has taken a hit by selling Senvion at a price that is around 40% lower than it paid for the firm in 2007. Even so, the deal looks like it makes sense. The two firms never looked an easy fit, and Suzlon can now move on and focus on markets including India, where the government has huge plans to invest in wind.

Suzlon has said the sale is part of a strategy to reduce debts and focus on India and the US, as well as the emerging markets of China, Brazil, South Africa, Turkey and Mexico. It will be good for it to gain more focus after its costly Senvion experiment.

The deal should also work for Senvion, which claimed a 5% share of the global turbine market in 2013/14 with sales of €1.8bn. It is profitable, and unshackling from Suzlon should enable it to focus on core products and core markets of Europe and North America.

How Senvion proceeds now will be of greater interest, and we expect more information from Centerbridge in the coming days.

Let’s go back to last April. French manufacturer Alstom denied reports that it was in takeover talks with US giant General Electric.

What happened next? Well, lo and behold, an official proposal from GE come out six days after Alstom's denial; and, in June, Alstom accepted GE’s offer. It just shows how wary you should be about trusting official denials in such blockbuster deals.

Now it has happened again. Yesterday, Indian manufacturer Suzlon announced a deal to sell German subsidiary Senvion to US private equity firm Centerbridge Partners for €1bn. This comes after years of speculation on Senvion’s future due to Suzlon’s debt problems.

It was a different story from Suzlon at the start of the month, when reports emerged that it was in talks with a large PE house and Chinese firms about selling Senvion. Suzlon called it a “rumour” that was “baseless and false and speculative”. Strong stuff.

Now it has sold Senvion to a large private equity fund, and that denial looks disingenuous. Okay, so the €2.1bn valuation in that story was way off, and we never heard the names of these Chinese firms, but we can be in no doubt that the story was materially true.

Don't get us wrong. We don't expect total openness in such deals. This isn't a nice, fluffy world where people always tell the truth; and we know there are commercial sensitivities around such deals.

Bu there are a couple of lessons in here for companies.

First, Suzlon could have said something bland like it was "exploring options". By choosing to be more forthright it has made it difficult for the market to take future denials from Suzlon at face value. This will make it harder to manage further speculation about its future.

And second, Suzlon can hardly be surprised that people speculated about Senvion. Suzlon spent most of 2014 dangling the prospect of a flotation of Senvion on the London Stock Exchange. If you keep talking about that sort of stuff then you must expect speculation.

But what about the deal itself?

Clearly, Suzlon has taken a hit by selling Senvion at a price that is around 40% lower than it paid for the firm in 2007. Even so, the deal looks like it makes sense. The two firms never looked an easy fit, and Suzlon can now move on and focus on markets including India, where the government has huge plans to invest in wind.

Suzlon has said the sale is part of a strategy to reduce debts and focus on India and the US, as well as the emerging markets of China, Brazil, South Africa, Turkey and Mexico. It will be good for it to gain more focus after its costly Senvion experiment.

The deal should also work for Senvion, which claimed a 5% share of the global turbine market in 2013/14 with sales of €1.8bn. It is profitable, and unshackling from Suzlon should enable it to focus on core products and core markets of Europe and North America.

How Senvion proceeds now will be of greater interest, and we expect more information from Centerbridge in the coming days.

Let’s go back to last April. French manufacturer Alstom denied reports that it was in takeover talks with US giant General Electric.

What happened next? Well, lo and behold, an official proposal from GE come out six days after Alstom's denial; and, in June, Alstom accepted GE’s offer. It just shows how wary you should be about trusting official denials in such blockbuster deals.

Now it has happened again. Yesterday, Indian manufacturer Suzlon announced a deal to sell German subsidiary Senvion to US private equity firm Centerbridge Partners for €1bn. This comes after years of speculation on Senvion’s future due to Suzlon’s debt problems.

It was a different story from Suzlon at the start of the month, when reports emerged that it was in talks with a large PE house and Chinese firms about selling Senvion. Suzlon called it a “rumour” that was “baseless and false and speculative”. Strong stuff.

Now it has sold Senvion to a large private equity fund, and that denial looks disingenuous. Okay, so the €2.1bn valuation in that story was way off, and we never heard the names of these Chinese firms, but we can be in no doubt that the story was materially true.

Don't get us wrong. We don't expect total openness in such deals. This isn't a nice, fluffy world where people always tell the truth; and we know there are commercial sensitivities around such deals.

Bu there are a couple of lessons in here for companies.

First, Suzlon could have said something bland like it was "exploring options". By choosing to be more forthright it has made it difficult for the market to take future denials from Suzlon at face value. This will make it harder to manage further speculation about its future.

And second, Suzlon can hardly be surprised that people speculated about Senvion. Suzlon spent most of 2014 dangling the prospect of a flotation of Senvion on the London Stock Exchange. If you keep talking about that sort of stuff then you must expect speculation.

But what about the deal itself?

Clearly, Suzlon has taken a hit by selling Senvion at a price that is around 40% lower than it paid for the firm in 2007. Even so, the deal looks like it makes sense. The two firms never looked an easy fit, and Suzlon can now move on and focus on markets including India, where the government has huge plans to invest in wind.

Suzlon has said the sale is part of a strategy to reduce debts and focus on India and the US, as well as the emerging markets of China, Brazil, South Africa, Turkey and Mexico. It will be good for it to gain more focus after its costly Senvion experiment.

The deal should also work for Senvion, which claimed a 5% share of the global turbine market in 2013/14 with sales of €1.8bn. It is profitable, and unshackling from Suzlon should enable it to focus on core products and core markets of Europe and North America.

How Senvion proceeds now will be of greater interest, and we expect more information from Centerbridge in the coming days.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.