The allure of a bigger share of the fast-growing wind power market might force larger engineering companies to target American Superconductor Corp (AMSC.O), a maker of electrical systems that run wind farms and turbines.
Shares of American Superconductor, which also offers smart grid infrastructure technologies, closed up more than 6 percent Friday on chatter that Swiss engineering group ABB Ltd (ABBN.VX) could be in talks with the Devens, Massachusetts-based company.
"I think it (the deal) is a possibility," analyst Pavel Molchanov of Raymond James said.
ABB is a large player in electrical engineering, including power grids, and so it could be a potential buyer for American Superconductor as it would add to its portfolio, Molchanov added.
"We never comment on rumors," said Jason Fredette, American Superconductor's director of investor and media relations. "We do not talk about M&A activities or anything along those lines."
ABB spokesman Thomas Schmidt also refused to comment on what he called "market rumors." The company, which also competes with France's Areva (CEPFi.PA), had earlier said it was looking for "bolt-on" acquisitions.
Molchanov said American Superconductor is an expensive stock and an acquisition of the company would be dilutive to the purchaser, at least initially, but the long-term benefit in terms of new products and R&D would outweigh the cost.
Shares of American Superconductor trade at a whopping 207 times their forward earnings, compared with the electrical components and equipment sector, which trades at a multiple of 30 times.
American Superconductor, which draws about 70 percent of its revenue from Sinovel Wind, beat the tide of recession, helped by the strong wind energy market in China.
While some analysts said a possible deal would not have any impact on Sinovel, others said China's largest wind turbine maker might have to renegotiate its major contracts with American Superconductor....MOREThe stock was recently up 14 cents at $32.83. Here's the five day chart from Yahoo Finance:
Tuesday, October 13, 2009
Wind power puts American Superconductor in play (AMSC)
Things are starting to pop in the alt-energy space. Following up on last Friday's "Wind power puts American Superconductor in play" we get some more detail from Reuters: