In August 2008, Trans-India (stock symbol: [t]TIL[/t]) announced that it had signed a letter of intent to acquire an unidentified company. On October 27, it announced that the company is Solar Semiconductor, a company that "designs, manufactures and sells solar photovoltaic modules for industrial, commercial and public-utility customers worldwide."
Trans-India set to make $375M stock offer
Deal for Solar Semiconductor first for “blank check” biz
Issue Date: November 15, 2008, Posted On: 11/18/2008
BY CHRIS NELSON
CHICAGO – In February 2007, Trans-India Acquisition Co. had what many companies its size would call a very successful initial public offering, raising $92 million.
What was unusual about Trans-India’s IPO was not the amount of money that it netted, but that investors bought into the Chicago-based company – which employs just a handful of people – before it had even begun marketing products or services.
Now, as the two-year anniversary of Trans-India’s IPO approaches, the company still does not have any significant operations and has not generated any revenue. But that is about to change: On Oct. 27, Trans-India announced that it had signed an agreement to acquire not less than 80 percent of Solar Semiconductor Ltd., a privately held firm with significant operations in India and the United States, for approximately $375 million in stock.
Solar Semiconductor designs, manufactures and sells solar photovoltaic modules for industrial, commercial and public-utility customers worldwide. Founded in 2006 by Hari Surapaneni, the company is domiciled in the Cayman Islands but maintains its two largest business units – sales and marketing and manufacturing – in the United States and India. Solar Semiconductor’s sales division is based in Sunnyvale, Calif., while the manufacturing arm is located in Hyderabad, India. The company’s Indian factories have an annual photovoltaic-module-production capacity of 75 megawatts per year, which according to Surapaneni, makes it the largest manufacturer of photovoltaic modules in India.
Trans-India’s investment in Solar Semiconductor was a seminal development for both companies, as well as India’s economy: It validates Trans-India’s stated mission, which is to invest in or acquire, through a merger, a business with operations primarily in India; and it also provides Solar Semiconductor a shortcut to the public market.
Trans-India is a special-purpose acquisition company – a type of business entity formed solely to acquire other businesses. Better known as “blank-check” companies, they are publicly traded shell operations that exist as little more than a name until investors pump money into them. Then, they seek out companies to buy. Trans-India, which is listed on the American Stock Exchange under the ticker symbol TTL, accomplished this when it struck a deal to acquire most of Solar Semiconductor.
"Solar Semiconductor's strategic positioning in the high-growth-potential, clean-energy sector and its remarkably rapid expansion excited us to merge both companies to deliver attractive returns to our shareholders," Trans-India president and chief executive officer Bobba Venkatadri said.
Under the terms of the transaction, Solar Semiconductor’s shareholders will receive Trans-India common stock valued at $8 per share. Both companies have refused to divulge the share-swap ratio. The purchase price is dependent on Solar Semiconductor’s future performance and its net income for the 2010 fiscal year.
Federal regulators must still sign off on the deal before it closes, but Trans-India and Solar Semiconductor both expect that to happen by February 2009. At that point, the newly acquired company will take the Solar Semiconductor name and begin trading on the American Stock Exchange (now known as NYSE Alternext). The new stock ticker for the acquired company has yet to be announced.
The transaction is essentially a “reverse merger,” in which a privately held company agrees to be acquired by a publicly traded firm, thus enabling it to bypass the lengthy and complex process of going public. Such a transaction typically requires a major reorganization of capital by the acquiring company.
“We were considering [putting the company up for sale] when Trans-India approached us,” Surapaneni said. “We evaluated their offer and felt it was the best option for us – everything just kind of fell into place.
“We are in the market to raise money; this transaction gave us the money we need to grow, and enables us to get listed on the [stock market],” Surapaneni added.
Surapaneni hinted that global credit crisis factored into the Solar Semiconductor executive board’s decision to accept Trans-India’s merger offer. "Access to capital markets is critically important for us to become market leaders in our sector," Surapaneni said.
Solar Semiconductor is growing fast – it raked in $15.2 million in for the fiscal year that ended March 31, and revenues for the current fiscal year have already topped $54 million. Company officials project sales figures for the 2009 fiscal year will reach $140 million – a nine-fold increase.
As part of the deal with Trans-India, Solar Semiconductor will receive a cash infusion that would bring it closer to its financial targets. In a filing with U.S. Securities and Exchange Commission, Trans-India said it has available cash of $85 million, and it plans to put $20 million toward solar cell expansion and $10 million toward module expansion. Trans-India said $45 million would be used for working capital, leaving $10 million in cash on the balance sheet.
Solar Semiconductor is also expanding physically – the company is nearing completion on construction of a new, 50-acre campus in Fab City, a hub for advanced semiconductor and electronics manufacturing near Hyderabad that is being developed by the Andhra Pradesh state government. The new facility, which is scheduled to begin production before the end of the year, will boost Solar Semiconductor’s manufacturing capacity from 75 megawatts to 120 megawatts in early 2009 and another 60 megawatts by the end of next year. The plant will employ between 300 to 400 people initially, but within four years, as many as 10,000 people could be working there, according to Surapaneni.
“The international solar industry is tiny today – it is just a bit part of the energy sector, contributing about .01 percent of the energy used worldwide,” he said. “However, it happens to be a free form of energy, and there is plenty of it; the sun gives us enough energy in just one day to power the entire planet for a year. But the challenge is harnessing it in an effective manner. We’re getting closer to that – the cost of solar energy has come down significantly, while the price of oil can only go up in the long run. It may be relatively inexpensive right now, but in the long run, it can only go up.”
indusbusinessjournal.com |
