Updated from Monday, March 15NANJING, China ( TheStreet) -- On the same day that China Sunergy switched CEOs, the solar cell maker was busy acquiring solar module makers. The corner suite move and acquisitions are not entirely unrelated, as the new CEO has extensive background at companies involved in the acquisition. China Sunergy said late on Monday that it would spend $47 million to acquire 100% of the shares of two affiliated module manufacturers: CEEG (Shanghai) Solar Science & Technology and CEEG (Nan Jing) New Energy. China Sunergy said in a release that its balance sheet would fund the acquisitions in a series of installment payments. China Sunergy is making the acquisitions as part of the popular solar industry theme of vertical integration. China Sunergy wants to move downstream in the solar market and change its profile from a solar cell maker supplying third-party module makers with cells, to a solar cell and module maker directly in contact with end customers. Whether it is cell players like China Sunergy moving downstream, or downstream players moving upstream, there are a range of vertical integration strategies being tested in the laboratory of the solar sector. China Sunergy's argument for spending the $47 million on the module makers is to shore up margins in what the Chinese solar player described as a "possibly volatile environment," in the release about the acquisition. China Sunergy's fourth-quarter earnings missed Street forecasts, and its gross margins only improved 0.5% while expenses doubled. One big question for China Sunergy might be how its module sales penetrate what is already expected to be a crowded market, with potentially intense downward pressure on module-sales price. By controlling more of the solar chain itself, China Sunergy could attempt to mitigate some of the ASP pressure. China Sunergy could also seek to gain more private label business from European solar companies that may outsource more module manufacturing in a declining ASP environment.
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