Shanghai Electric invests in Manz, German equipment supplier to stay in solar segment

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Manz will stay in solar and continue its attempts to sell its CIGSfab turnkey lines. To fund its ongoing efforts, Manz has entered into a strategic collaboration with Shanghai Electric, which will see the Chinese company purchase the additional shares issued by Manz, to provide Shanghai Electric with a 29.9% stake in the company after the share increase.

“Shareholders Dieter Manz and Ulrike Manz, who currently own 35.2% and 3.8% of the company, will not exercise their subscription rights,” Manz advised in a statement. These subscription rights are to be taken up by Shanghai Electric.

In a conference call today, Manz advised that Shanghai Electric intends to deploy Manz’s CIGS modules in a manufacturing facility in China. The German company will retain the right to sell its CIGSfab to third parties, under the deal.

The agreement to develop a Shanghai Electric CIGSfab in China is non-binding at present.

“Under the agreement, Shanghai Electric would deploy solar parks in China with CIGS modules, but would then establish a CIGS fab in China for their own operations,” explains Goetz Fischbeck, CEO of Smart Solar Consulting who participated in today’s conference call. “However, Manz remains optimistic that, now with the backing of Shanghai Electric, other customers will be encouraged to deploy the technology [in their own fabs].

The Shanghai Electric facility, which could be constructed as soon as this year, could act as a blueprint fab [for potential Manz csutomers], demonstrating that a CIGS fab with a meaningful capacity, like in hundreds of MW, could make financial sense,” adds Fischbeck.

The deal defies the expectations of some within the solar segment, who suspected Manz would exit the solar segment to focus on its supply of the electronics and battery storage segments.

Dieter Manz will remain as CEO of the eponymous company for a further five-year term under the deal, although Fischbeck notes that the deal represents a “fine balancing act” for the company founder.

The capital increase and share purchase deal is underpinned by a backstop agreement, in which Shanghai Electric commits to purchasing all of the new shares issued, with a €40/share upper price limit. This means that current shareholders are not at risk of the share issuance diluting the value of their Manz shares in the short term.

However, if Manz share price surges on the back of the agreement and subsequent operations, these shareholders could chose to take up all of their subscription rights, resulting in Dieter and Ulrike Manz having to sell more of their holdings in the company than they would have originally intended.

“This will be tricky for Dieter Manz,” says Fischbeck. “It is a fine balancing act to recognize the upside of this transaction but if the share price goes far above €40/share, then he may have to give up more of his holding than he intended.”

The Manz statement reads: “As part of the Investment and Backstop Agreement, shareholder Dieter Manz has also committed that in the event a voting agreement is concluded, following the implementation of a mandatory offer, he will sell as many shares to Shanghai Electric as are required to enable Shanghai Electric to attain a 30.1% participating interest in the company through its subsidiary. If a mandatory offer is not submitted within a year after the capital increase, Shanghai Electric can request that Mr. Manz sells as many shares as are required to achieve a participating interest of 29.9%.”

The backstop agreement also commits Dieter Manz to act in concert with Shanghai Electric at the company’s Annual General Meeting of the shareholders. The CEO and company founder has agreed to vote in concert with Shanghai Electric, which essentially gives Shanghai Electric de facto control of the company.

“Even if only a 30% shareholder, by stock market law effectively Shanghai Electric is gaining a majority control,” says Fischbeck. This also triggers a mandatory purchase offer that Shanghai Electric is obliged to offer within 12 months of the transcation reaching close, to purchase all of outstanding shares.