India's Suzlon Speeds REpower Takeover

By TOM WRIGHTSeptember 4, 2008;

Suzlon Energy Ltd., the world's fifth-largest wind-turbine manufacturer by sales, is moving ahead of schedule to consolidate its takeover of Germany's REpower Systems AG, a move that will speed the transfer of technology between the two companies.
Suzlon, based in Pune, India, has faced concerns about its technology after blades on 2.1-megawatt turbines sold in the U.S. to Deere & Co. and Edison International's Edison Mission Energy began splitting last year. Customers in India also have complained their turbines don't generate as much power as expected.
In a bid to improve its technology, Suzlon agreed last year to take over Hamburg-based REpower in a deal that valued the German company at $1.7 billion. Analysts applauded the tie-up, which will give Suzlon access to REpower's cutting-edge technology, including blueprints for large offshore wind turbines.
But Suzlon has been unable to draw on REpower's technology because of a strict German corporate law aimed at protecting minority shareholders. The law requires that foreign investors taking over German companies reach a so-called domination agreement before they can transfer technology or profits out of a target company. Such an agreement involves getting 75% of shareholders on board and making a tender offer to buy out minority shareholders.
Suzlon said this week it plans to push for a domination agreement to be concluded in "due course" according to German law. And it is setting up the agreement to be in place faster than originally planned. Under last year's deal, Suzlon was to increase its initial 34% stake in REpower in stages until May next year. But the company also said this week that it has reached a deal to pay Portugal's Martifer SGPS SA €270 million ($392 million) for Martifer's 22% stake in REpower, five months ahead of schedule. That purchase will take Suzlon's overall holding in REpower to around 90%.
Analysts said Suzlon's move was a positive one aimed at assuaging concerns over its technology.
A spokesman for Suzlon, Vivek Kher, said the REpower takeover was driven by a desire to penetrate the European market and get access to large offshore wind turbines, not for other technology.
"Transferring technology or manufacturing REpower products in India were never the objectives of the takeover," Mr. Kher said. "The domination agreement however, will ease all round cooperation between the two companies for the mutual benefit of all stakeholders in both companies."
Write to Tom Wright at tom.wright@wsj.com