Gamesa potential target if turbine sector consolidates – bankers - Analysis
Vestas, Alstom, GE, Xinjiang Goldwind potential consolidators
19.7% shareholder Iberdrola makes hostile bid tough
Spanish wind-turbine manufacturer Gamesa [BME:GAM] will be a potential takeover target if the sector starts to consolidate, bankers following the situation and an industry source said.
The company, based in Zamudio in Spain’s Basque Country, operates in a mature market, the industry source noted. The prices of turbines are falling, meaning deals could produce economies of scale and remove competitors, the source added.
Gamesa would like to take an active role in sector consolidation as the industry becomes more competitive, a person familiar with the company’s thinking said. The likeliest scenario would involve consolidation with a European peer, said the industry source. Gamesa declined to comment.
Large European players include Vestas [CPH:VWS] of Denmark and Alstom [EPA:ALO] of France, the source noted. General Electric [NYSE:GE] in the US and Xinjiang Goldwind [HKG:2208] of China could also make sense as bidders.
Vestas used to be a shareholder in Gamesa and has a technology collaboration agreement with the Spanish company. The historical situation means the two get linked in consolidation talk, said a person familiar with Vestas’ thinking.
Vestas‘ main focus is on organic growth, although the company will consider opportunistic acquisitions across business segments, a spokesperson said. He did not comment when asked about a potential interest in Gamesa.
Gamesa is “more of a target than a bidder”, the source said. It does not have enough cash to be a serious consolidator itself, the source added. Gamesa had net cash of EUR 39m on its balance sheet at the end of June.
Meanwhile, Gamesa's 19.7% shareholder Iberdrola [BME:IBE] holds the key to its future, one Madrid-based banker said.
The presence of a stable, long-term shareholder on Gamesa’s register means it would be difficult to attempt any kind of hostile move, the banker said. Iberdrola might be interested in a deal that rolled over a framework agreement to supply it with turbines over the long term, he said.
Talk of Gamesa being taken over remains speculative at this point, said a person familiar with Iberdrola’s thinking. A successful restructuring means its shares could be argued as quite expensive, the person said, adding that an agreed sale could involve a large windfall for the utility. Iberdrola declined to comment.
There have been a number of rumours about Gamesa being a target over the years, said a second Madrid-based banker. It is “no secret” that the company could be a target, said a London-based banker, adding that no bids have materialised.
If no takeover is forthcoming, Gamesa could also consider a merger, the industry source said. A third consolidation option would be to buy a startup with disruptive technology, said the second Madrid-based banker.
Gamesa is thinking about consolidation, but hasn’t seen any clear opportunities yet, said the person familiar. A deal to buy a startup would be unlikely as the company believes it develops good technology in-house, the person added.
Gamesa’s shares are trading at EUR 12.73, giving a market capitalisation of EUR 3.57bn. The company had net financial debt of EUR 549m at the end of June. Iberdola’s stake would be worth EUR 703.3m at current prices.
The company’s shares started climbing slowly at the beginning of 2013 and began a sharp climb after hitting a 52-week low of EUR 6.44 in October. The stock has fallen slightly since hitting a high of EUR 16.74 on 23 July.