Exit talks reopen doubts on Senvion future


November 30, 2015

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The news that Centerbridge is considering a listing of German manufacturer Senvion has given us a feeling of deja vu.

Last year we watched as Indian group Suzlon kept raising the prospect of a stock market flotation for Senvion, which was then its subsidiary, before backing away from the idea.

In the end Suzlon decided to sell the subsidiary, which it bought in 2007 when it was called Repower, to US private equity firm Centerbridge for €1bn. The deal concluded in April. That deal was meant to mark the start of a new era of stability for Senvion.

Senvion’s chief executive Andreas Nauen said that it would enable the firm to strengthen its position in its established markets and grow in emerging markets. Meanwhile, Centerbridge’s managing director Stefan Kowski said it would enable the manufacturer to invest in new products.

But now the questions on the future of Senvion have returned. Reuters has reported that Centerbridge is working with JP Morgan and Deutsche Bank on the firm’s future. It could list the company, sell it for an estimated €1.5bn, or hold onto the firm as it is. These talks are still at a relatively early stage and we do not expect a decision until next year.

However, if we were Centerbridge and could get the €1.5bn that is being banded around then we would make a quick exit too. That would be a return of €500m in under a year, and should also lead to Senvion getting the long-term investor it has been looking for. This could be another large manufacturer or a financial investor with a renewables track record.

This option looks a lot cleaner than the alternatives. Centerbridge does not have a track record in the renewable energy sector and we are just not convinced that it wants to be involved with Senvion for the long term. Listing part of Senvion on the stock exchange is a commitment that adds hassle while opening up the firm to stock market ups and downs.

The other important point about a stock market flotation is that Centerbridge would have to be confident it can keep growing Senvion in a competitive and ever-changing sector. There is such change and consolidation among the large turbine makers that it cannot have that confidence. The big European manufacturers could look very different in five years’ time.

And holding onto it does not make much sense either. The fact these stories are in the public domain tells us that Centerbridge does not see itself as a long-term partner for Senvion, and is trying to spark a bidding war. It has not officially commented but, to us, it looks like it is trying to drive up the price by fanning rumours of a potential sale. If others bite and bid aggressively then it could add an extra €200m more to any sale price.

The problem with this approach is that Centerbridge has raised questions about its plans. These questions are likely to hang around and foster anxiety among those at the German firm. Better for Centerbridge to exit now than to risk that toxic situation.

The US firm appears confident that it can get that €1.5bn. It was able to buy Senvion on the cheap because of Suzlon’s then-troubled financial situation; it is confident that there is a strong sellers’ market; and the German firm has won big orders since the deal, including a 109MW contract in Scotland in October. The company looks like it is in good shape.

This could work out best for Senvion too. It is a competitive market and, if Centerbridge is not in it for the long-term, it would be best for Senvion to team up with someone who is.

But all this relies on the private equity firm gaining the interest it appears to want. If there are interested bidders, bring them on.

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