ZF Friedrichshafen, a global name in the production of automotive components, is aiming to catapult itself into the top league of gearbox manufacturers for wind turbines with the acquisition of Belgium-based Hansen Transmissions.
ZF's cash offer of £0.66 (€0.75) per share announced on 25 July 2011 has initially been taken up by Suzlon subsidiary AE-Rotor Holding and Ecofin Water & Power Opportunities, a UK investment company. After acquiring 100% of Hansen from Allianz Capital Partners and Apax Partners Worldwide in 2006, Suzlon has gradually reduced its stake step by step to 26.06%, including a divestment of 10% to Ecofin in January 2009. Ecofin now holds 12.32%. Around 47% of Hansen shares are in free float, the remaining spread among investors BlackRock Investment, Schroders Investment and Fidelity.
Suzlon and Ecofin's pledges to sell their Hansen stakes to ZF are binding unless a competing 12.5% or 10% higher offer is received for the AE or Ecofin stakes respectively. Robert Clover, analyst at HSBC Global Research, said on 26 July that £0.82/share is an average fair value for Hansen. But he then applied a 20% discount to the valuation - down to £0.65/share - to "reflect the stock overhang from Suzlon" as a result of its ongoing squeeze-out deal with Repower.
Clover's analysis suggests Hansen has a nearly 20% higher underlying value than £0.66/share. So ZF's offer may not be the last move. Other investors could yet make higher counter-bids to Suzlon and Ecofin.
ZF's move followed an announcement back in June 2010 that it would supply gearboxes to Vestas exclusively from a factory currently being built in the US. With production capacity of 1,500 2MW gearboxes per year - a downward revision from the 2,000 units reported in June 2010 - the facility is to begin output in 2012.
If the acquisition succeeds as planned, Hansen's current 7.6GW/year manufacturing capacity will add to ZF's 3GW in the US to give a total output capability of around 11GW a year.
ZF Services, the ZF business unit responsible for wind gearbox production and servicing, will then be vying with Siemens-owned gearbox supplier Winergy, which has 10-12GW of output capacity a year. The only other competitor of similar size is the Chinese High Speed Transmission Equipment Group, which is raising output capacity to 12GW in 2011 from 9GW in 2010.
The three companies' potential output will be equivalent to the total amount of installations of geared turbines worldwide last year. Taken with the many smaller gearbox manufacturers, including Bosch Rexroth, Moventas, Jahnel-Kestermann, Renk, Eickhoff, GE, Echesa and Wikow Wind, as well as other Chinese players like the DHI-DCW Group, and Chongqing gearbox group, there is likely to be overcapacity in gearbox manufacturing unless turbine output expands rapidly in the short term.
ZF Services has launched its offer during troubled times for Hansen. The company's gearbox manufacturing works in Belgium and India and the assembly works in China operated at an average output of just 54% capacity in business year to end-March 2011.
But ZF, a firm owned to 94% by the Zeppelin Foundation, highlights Hansen's profile as an established designer, manufacture and supplier of multi-megawatt wind turbine gearboxes with strong in-house research and development operations. Indeed, as a supplier to most of the major names in geared wind turbines, Hansen said in July 2011 that it has nine new products in the pipeline scheduled for serial delivery in the next 24 months, and one addition entering serial delivery this financial year.
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