23 March 2016

M&A 2016: Nordex and Acciona Windpower

Turbine maker Nordex always used to be seen as an acquisition target. But the German firm seized the initiative when it agreed to buy Acciona's wind turbine manufacturing arm, Acciona Wind Power (AWP), in October for €785 million ($880 million), in cash and shares.

‎"From a strategic point of view we, as well as our Spanish partner, wanted to shape our own future," says Pierre Schneider, head of corporate development and M&A at Nordex.

The deal was still awaiting regulatory sign-off as this article went to press, but if successful it will, in one swoop, create a top-five wind manufacturer, giving the company scale. This is vital in a competitive market in which governments increasingly opt for reverse auctions rather than predetermined subsidies.

"Deals like this are very value creative for companies," says Maria Cordon Ucar, manager of corporate development and investor relations at Acciona. "It's very difficult to get to scale on your own."

The deal is projected to create some €95 million of synergies by 2019 because the companies are "a perfect match", according to an investor presentation prepared by Nordex.

Nordex says 80% of its revenues come from Europe and it tends to cater for mid-sized projects of between 15 and 30MW, whereas 70% of AWP's business is in emerging markets and it tends to focus on bigger deals of 100MW. And Nordex has particular strengths in blade design and in projects which are sensitive to noise, whereas AWP has strengths in making concrete towers.

The combined group hopes to become "a global player", growing revenues to between €4.2 billion and €4.5 billion a year in 2018. By comparison, Nordex had sales of about €2.4 billion in 2015, and AWP had €1 billion.

EBITDA margins are also expected to be boosted, to more than 10% in 2018, compared with 2015 levels of 7-8% and 8-9% for Nordex and AWP, respectively.

The deal, however, is unlikely to be popular among bankers. The companies first got together for talks in secret, and by the time they had thrashed out a structure and financial plan for the merger, they realised that banks were not required.

The structure of the deal is interesting because it makes a long-term strategic partner of Acciona, which is the parent company of AWP and one of the biggest wind operators in the world, with some 7GW of installed generation capacity. It has a "vast project pipeline".

Nordex will pay Acciona €366.4 million in cash and 16.1 million newly-created shares valued at €26 each. Acciona will use the cash to buy further shares from the current biggest shareholder SKion/momentum, an investment vehicle belonging to the Quandt family, a major shareholder in BMW.

"From a strategic point of view we wanted to shape our own future," Pierre Schneider, Nordex

As a result, Acciona will have a 29.9% stake in Nordex, and will take two seats on its supervisory board.

Nordex was raising debt to help fund the deal as this article was being written. Nordex is trying to raise some €250 million through the first ever green-labelled Schuldschein – a type of German private placement.

BayernLB, BNP Paribas, Commerzbank, HSBC and UniCredit are arrangers of the deal. DNV GL will provide a second opinion on the environmental credentials of the bond's use of proceeds against the Climate Bond Standards.

The merger could pave the way for further consolidation in the wind sector, as it recovers after the hard times ushered in by the global financial crisis.

"We believe this deal is not only transformative for both companies, but also for the whole sector, where we expect further consolidation as the sector matures," explains Acciona's Cordon Ucar.

She adds that most of the previous consolidation in the wind turbine manufacturing industry has taken place in the offshore sector, through joint ventures and partnerships.

So, will this mark the first in a series of acquisitions for the expanded Nordex?

"Never say never," says Schneider, but he points out that the two companies will have their work cut out integrating the two companies for the foreseeable future .EF

PERSONALITY OF THE YEAR Mark Carney, Bank of England and FSB
BIOENERGY Enviva Partners
SOLAR Shams Ma'an
WIND Veja Mate
M&A Nordex and Acciona Wind Power
ENVIRONMENTAL BOND Lightsource Renewables
IPO 8point3
ENERGY EFFICIENCY Renew Financial and Citi
WEATHER RISK Swiss Re Corporate Solutions
CARBON World Bank's Pilot Auction Facility