Swiss-based industrial firm ABB (NYSE: ABB) said today that it has agreed to acquire U.S.-based solar power firm Power-One Inc. (NASDAQ: PWER) for $6.35 a share, or about $1 billion, in cash. The acquisition is expected to close in the second half of this year, and includes $266 million in Power-One’s cash on hand.
Power-One makes solar inverters, which convert the direct current from a solar installation into alternating current that can be sent to the electrical power grid. Competitor Satcon Technology filed for Chapter 7 bankruptcy liquidation earlier this year after failing to find a buyer.
From ABB’s viewpoint apparently, paying real money for Power-One was preferable to picking the bones of Satcon. Another power inverter firm, Enphase Energy Inc. (NASDAQ: ENPH), makes a smaller device called a micro-inverter, which does the energy conversion at the module level rather than the installation level.
ABB already had expected to sell $100 million of its own solar inverters in 2013, and if Power-One’s sales approach the $1 billion total they made in 2012, ABB has got itself a bargain.
The press release notes that the International Energy Agency (IEA) that the solar inverter market is expected to grow by 10% annually through 2021, driven by rising demand, especially in emerging markets, rising electricity prices and falling costs. In such a scenario, scale usually wins and that is what ABB gets with Power-One.
Power-One’s shares are up about 56% from their $4.04 close on Friday to $6.32, in a 52-week range of $3.51 to $7.16.