Suntech Jumps on Buffett Buyout Report: China Overnight
Chinese solar manufacturers rallied in New York, led by Suntech Power Holdings Co. (STP), on a report that billionaire Warren Buffett may be interested in buying the company forced into bankruptcy after defaulting on debt.
The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese companies in the U.S. rose 0.4 percent to 89.44 yesterday. Suntech jumped as much as 28 percent after a news service owned by Hong Kong Economic Times said Buffett’s MidAmerican Energy Holdings Co. may buy the solar panel maker, citing an unidentified person. Trina Solar Ltd. (TSL) surged the most in two months. SouFun Holdings Ltd. (SFUN) slumped a second day.
Suntech, which defaulted on a $541 million bond repayment last month, has lost 18 percent since Chinese banks filed an insolvency petition for its main unit March 20. Tina Potthoff, a spokeswoman for MidAmerican in Des Moines, Iowa, said by e-mail that the company doesn’t comment on speculation. Changzhou-based Trina said that it will post a profit in the second half.
“The rumor Buffett is interested in buying Suntech, and separately, Trina saying they will see profit again in the second half this year” is helping drive gains in solar equities, Gordon Johnson, an analyst at Axiom Capital Management Inc., said by e-mail in New York. “Chinese solar companies would be bankrupt were it not for their ability to roll over existing Chinese debts.”
Suntech, LDK Solar Co. and Yingli Green Holding Co. are among the top 10 worst performers this year on the China-US gauge amid a supply glut and alternative-energy subsidy cuts in Europe. Thomas Young, Trina’s vice president of investor relations in San Jose, California, said in an e-mail yesterday that the company is targeting a return to profitability during the second half of 2013.
The iShares FTSE China 25 Index Fund (FXI), the largest Chinese exchange-traded fund in the U.S., closed little changed at $35.63 in New York, the lowest level since Oct. 10. The Standard & Poor’s 500 Index added 0.6 percent to 1,563.07.
Suntech, a Wuxi, China-based company that was the world’s biggest solar-panel maker in 2011, surged 16 percent to 48 cents in New York, the biggest one-day jump since Dec. 19.
MidAmerican has invested in solar power projects in California and Arizona and wind farms in Illinois. Chief Financial Officer Patrick Goodman said in November that the company was targeting renewable energy deals, in part because utility valuations were high.
An e-mail to Suntech’s investor relations unit wasn’t immediately returned outside of business hours in China.
“If Buffett were to buy Suntech, he would be entering a company with big debt and a market where solar product prices are still low,” James Kelleher, a director at Argus Research in New York, said by phone. “Suntech doesn’t have any of the advantages of Buffett’s other previous acquisitions. China would be reluctant to do debt restructuring for Suntech should Buffett take over.”
Trina’s American depositary receipts climbed 7.6 percent to $3.84 in New York, rising the most since Jan. 22. The company has reported losses for six straight quarters through the end of 2012. Yingli Green, the world’s biggest solar panel maker by shipments, added 4.5 percent to $1.85 in a third day of gains.
Budget hotel chain operator Home Inns & Hotels Management Inc. (HMIN), based in Shanghai, rallied for the first time in seven days, advancing 3.9 percent to $25.93. China Lodging Group Ltd. jumped 5.2 percent to $15.88 after losing 8.3 percent last week.
Travel-related stocks dropped last week after the emergence of a new strain of bird flu in China. Three more cases of the H7N9 virus that’s killed seven people since March were reported yesterday. The government is “confident” it will be able to deal with the outbreak “effectively,” Ma Xiaowei, a vice minister at the National Health and Family Planning Commission, said in an interview in Beijing April 7.
New Oriental Education & Technology Group Inc. (EDU), China’s biggest private education company, rose 4.7 percent to $16.83, the steepest rally since March 18. The shares slumped 11 percent last week. Ctrip.com International Ltd. (CTRP), the biggest online travel agency in China, gained 4.7 percent to $21.06, after sinking 5.9 percent last week. China Eastern Airlines Corp. (CEA) added 3.3 percent to $20.69 in New York.
SouFun, owner of China’s largest real estate information website, slid 3.3 percent to $22.25.
The Beijing branch of China’s central bank boosted the minimum down-payment requirement on commercial bank loans for second-home purchases to 70 percent, according to a statement posted on People’s Bank of China’s website yesterday. China’s largest cities published rules aimed at limiting home purchases before April 1 as the government seeks to curb gains in home prices.
The Hang Seng China Enterprises Index (HSCEI) in Hong Kong was little changed at 10,429.76 yesterday. The Shanghai Composite Index of domestic Chinese shares dropped 0.6 percent to 2,211.59, the lowest level since Dec. 27, resuming after a two- day break in trading.
China is scheduled to report March inflation data today.
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