SunEdison to separate into two independent companies to focus on solar business.
SunEdison is a manufacturer of semiconductors and solar panels and develops solar power plants. SunEdison announced it would sell a minority interest in the semiconductor business and use the money to promote the solar business. Each company would be run separately, with more details to follow later this year.
As of this writing, the stock (NYSE: SUNE) is up over 16% on the news. Business writers are all a-flutter with talk of the “spin-off.” Spin-offs can be great for shareholder value. Is this a value creating situation?
However, SunEdison’s press release only mentions a sale of part of the semiconductor business. It says nothing about sending any part of the remaining shares in the semiconductor company to shareholders. If that is indeed the case, this run-up is related to contemplated derivative majority ownership in a separately run semiconductor business through a solar company that currently owns the whole thing.
The other interesting angle is that the dynamics between the semiconductor and solar businesses and their contributions to the company. Unlocking value may be for the boring, mature, cyclical, competitive, commoditized semiconductor business.
For the six months ended June 30, 2013, semiconductors accounted for:
- over 55% of net sales;
- the only operating income in the company ($5.0 million vs. a 36.0 million loss for solar); and
- about 25% of capex.
However, the annual numbers at December 31, 2012 look a bit different as semiconductors accounted for:
- about 36% of net sales;
- a $5 million loss vs. $162.2 in income for solar; and
- about 15% of capex.
Solar does get the government bennies, which accounted for almost $50 million in revenue in 2012.
This will be an interesting one to watch. We will have to wait until the registration statement for the semiconductor business is filed to see the financials, transaction structure and post-separation arrangements. Since we’re nerds, we’re looking forward to it.