SunEdison Surges After Announcing Plan for Semiconductor IPO

SunEdison Inc., the polysilicon supplier formerly known as MEMC Electronic Materials Inc., surged the most in a seven weeks after announcing plans to separate its semiconductor operations in an initial public offering to fund the development of solar farms and pay down debt.

SunEdison gained 16 percent to $7.88 at the close in New York, the most since July 2.

SunEdison will sell a minority stake in its semiconductor business through the IPO, the St. Peters, Missouri-based company said today in a statement. The venture will be named SunEdison Semiconductor Inc. and operate independently with its own board of directors.

“Longer term, they see greater growth potential out of the solar business, and they need capital to fund that,” Angelo Zino, an analyst at Standard & Poor’s in New York, said in an interview. “If you look at where they’ve been pushing their efforts, it’s been on the solar side, and that business has grown to the point where it’s very difficult to manage both semiconductors and solar. Spinning that business off makes a lot of sense.”

The IPO is expected by early next year, according to the statement. The percentage of the new business that SunEdison plans to sell hasn’t been determined.

“Two years ago there were more synergies between semiconductors and solar,” said Zino, who upgraded SunEdison shares to a strong buy today. “This unlocks a lot of value for investors, because a lot weren’t fully appreciating that semiconductor business, which is about a third of their revenue.”

SunEdison is the largest U.S. supplier of polysilicon wafers for semiconductors and solar cells after Hemlock Semiconductor Corp. It was known as MEMC until May. MEMC acquired the solar developer SunEdison LLC in October 2009 for $200 million.

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