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— Private Equity —
Sponsor exits have been few, making GT Solar a bright spot in a mostly gloomy buyout business in 2008. The Merrimack, N.H., company's market debut on July 24 produced $317 million of proceeds for the sponsors, allowing the firms to partially cash out and reap far more than they paid. The Los Angeles buyout shops acquired GT Solar in January 2006 for $83 million, according to regulatory filings. The deal was financed with a $15 million note and the rest equity, including a $15 million rollover from management and the private equity arm of Royal Bank of Canada, filings say.
Counting a $90 million dividend to shareholders shortly after the IPO, plus $35 million in shares sold in the secondary, the sponsors appear to have earned back around 8 times their original equity. And they stand to rake in more. GT Solar Holdings LLC, which the private equity partners control, still owns about 74% of the business. Factoring in their existing stake, the firms have reaped a nearly 15-fold paper profit -- despite a steep drop in stock price that coincided with Wall Street's meltdown last fall. Not everyone in solar has been smiling. About a week after GT Solar's successful public listing, DLJ Merchant Banking Partners registered its Enfield, Conn., solar company, STR Holdings Inc., for an IPO, hoping to raise $300 million. That public offering has yet to occur. As for GT Solar, the company is now trading around $5.34 per share, about 68% below its IPO pricing. In its debut, GT Solar's stock closed at $17 but hit a 52-week low of 88 cents on Nov. 24. Its secondary offering last month priced at $5.86 per share. GFI and Oaktree did not respond to repeated requests for comment. GT Solar also declined to comment. Since its recapitalization in 2006, the company has expanded quickly, buoyed by rising demand for solar energy and other alternative energy sources. It produces photovoltaic and polysilicon equipment used to manufacture solar wafers, cells and modules, doing most of its business abroad. In 2005, it generated $23 million in revenue, raking in about 85% of its sales from China. Revenue has swelled over the past few years, to $541 million in fiscal 2009. Operating income, meanwhile, tripled over the previous year, pulling in $143.5 million for the 12 months ended March 28. Today about 62% of its revenue comes from China, though the company has attempted to diversify beyond China, making South Korea its second-biggest customer. The company said in its latest annual report that it continues to expand in China, which, along with Taiwan, accounted for 44% of the world's solar cell production last year. It has also increased sales in Europe, primarily Germany; the U.S. accounts for less than 2% of revenue. GT Solar has managed to add new customers, as well as a polysilicon business, which generated $97 million, or 18%, of total revenue in fiscal 2009 and looks poised for further growth. As of March 28, its backlog of polysilicon orders stood at $836 million, compared with some $341 million worth of contracts for its PV equipment. The solar company's capital structure has been built to weather the recession. It carries no long-term debt and has some cushion on its balance sheet. As of March 28, it had about $107 million in cash, nearly twice last year's $55 million. Its market capitalization now hovers around $765 million, with sponsor-controlled GT Solar Holdings' remaining stake worth about $564 million. That market cap is a long way from the solar equipment maker's
origins some 15 years ago in a basement in Nashua, N.H., when its
co-founders, including former CEO Kedar Gupta, seeded it with just
$1,000. Both Gupta and GT Solar's current chief executive, Tom
Zarrella, still own stakes in the company, which is enriching them
alongside the sponsors. Car chase Comments |
Private equity firms GFI Energy Ventures LLC and Oaktree Capital Management LP have seen the light with GT Solar International Inc. A little less than a year ago, GFI and Oaktree engineered a $500 million initial public offering for GT Solar, one of few IPOs in the downturn. In June, they followed with more profits through a secondary offering.
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I'm no financial expert, but I am amazed that in these times of energy uncertainty solar companies, like the troubled First Solar, would be doing anything but surging ahead.
If I owned a solar manufacturing company I'd keep it well clear of the stock market.