First Solar Rises on Siemens Takeover Talk

First Solar rises in trading on Wednesday as a report surfaces that German giant Siemens may make an acquisition bid for the solar company.
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NEW YORK (

TheStreet

) -- First Solar finished up 3.7% on Wednesday after a report surfaced the German conglomerate

Siemens

(SI) - Get Report

was going to make an acquisition bid for the solar industry leader.

The report, which sources told

TheStreet

came from the paid subscription service

Briefing.com

, stated that Siemens would make a bid for First Solar.

First Solar did not immediately respond to a request for comment on the report.

In the least, there was no clear reason for First Solar to rise in trading other than the report of a potential takeover. First Solar dipped on its earnings last week, even though it beat expectations, as the company provided a sober assessment of the solar market and guided gross margins down for the full year.

Analysts who cover First Solar aren't buying the market chatter, either.

Siemens has made itself a major player in the energy markets, including the U.S. energy market, and it has dabbled in just about every alternative energy source, from wind to nuclear and solar. Siemens has arguably made the least in-roads with solar, and an acquisition of First Solar would catapult the German conglomerate into a leading position in the solar market.

However, First Solar analysts say the solar bellwether has never shown any interest in selling, and has no immediate need to sell given its comfortable cash cushion.

Even after its acquisition this year of NextLight, a $245 million deal made in cash, First Solar is in the best balance sheet position in solar.

Additionally, Siemens already made an acquisition in the solar thermal space, as opposed to making a move into photovoltaic solar.

Siemens acquired the solar thermal power company Solel Solar Systems in 2009. Siemens president and CEO Peter Löscher said of the Solel acquisition, "After the rapid and highly successful expansion of our wind power business, we now want to continue this success story in the solar sector. With the acquisition of Solel, Siemens can now strengthen its market position in the promising business of solar thermal power plants."

TheStreet

has spoken to the head of Siemens U.S. energy business about its solar outlook.

>>Siemens CEO Q&A: Keys to Energy Investing

Theodore O'Neill, analyst at Wunderlich Securities, said that the rumor seems like a planted one to him. "First Solar management isn't interested in selling the company -- and has no need to," O'Neill said. The analyst also argued that First Solar is too big for Siemens to take over without changing the nature of Siemens operations significantly. The analyst compared the rumor to the reports that surface from time to time about a takeover of

MEMC Electronic Materials

(WFR)

, which can originate with "motivated sellers."

Jeff Bencik, analyst at Kaufman Brothers, said that it could make sense for Siemens to get into solar in a major way, at least from a position of pure logical speculation, through a takeover of the biggest solar company. Bencik said that First Solar's board would have to review any offer as part of the normal course of business, however, the Kaufman Brothers analyst also doubted the deal would happen.

Analysts noted that Siemens has previously surfaced in the solar rumor mill as a buyer of

LDK Solar

(LDK)

, while MEMC has not only been a target of takeover rumors, but from time to time a rumored buyer in never-consummated deals. Analysts seemed to think the "motivated seller" rumor plant was as logical an origin for the First Solar report as any of the previous episodes of solar M&A chatter.

Christine Hersey, analyst at Wedbush Securities, said no one she spoke with on Wednesday believed the Siemens-First Solar deal would happen, and that it was hard to see how it made sense for either company. The analyst found it hard to believe that Siemens would want to tie itself to the thin film industry with the crystalline silicon industry having come up so quickly to be a major competitor to First Solar.

Additionally, Siemens could easily enter into module sales relationships as opposed to having to take on an acquisition of an $11 billion market cap company like First Solar. Siemens market cap is $88 billion.

The Wedbush analyst said the First Solar takeover report was mostly notable for being the first time, at least in as long as she could recall, that the U.S. solar leader had surfaced as the target of the typical solar rumor mill reports.

-- Written by Eric Rosenbaum from New York.

RELATED STORIES:

>>Siemens CEO Q&A: Keys to Energy Investing

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