August 18, 2011 / 5:37 PM / 6 years ago

Solar firm STR sees M&A as core strategy: CFO

BANGALORE (Reuters) - Solar company STR Holdings Inc is looking to buy a competitor or a raw material manufacturer as it brings acquisitions into the heart of its business strategy.

"We are looking at acquisitions," Chief Financial Officer Barry Morris said in a telephone interview. "Before, we were a little more opportunistic, now it's definitely part of our core strategy."

STR provides the photovoltaic module industry with solar encapsulants -- thin sheets of ethylene vinyl acetate that are inserted between solar cells to protect them and provide electrical insulation. Revenue last year was $372 million.

Earlier this week, the company sold its product quality assurance business -- which offers testing, audit, inspection and responsible sourcing services -- for $275 million in cash.

Morris said the acquisition policy would avoid competing with its customers, which include First Solar and Suntech Power.

Competitors include Bridgestone Corp, Solutia Solar GmbH, Hangzhou First PV Material, Mitsui Chemicals Group, Dow Corning Corp, Dai Nippon Printing Co Ltd and Dupont.

"I don't see us going into module manufacturing. A nice kind of thing would be to buy an encapsulant manufacturer to give us a geographic presence," said Morris, who joined STR in 2002.

"We'd also be willing to look upstream ... at some of the raw materials we need to manufacture our products, either as an outright acquisition or as a joint venture where we would have a little more control over input costs."

Resin and paper liner are the two primary materials used in STR's products, with resin accounting for more than half its direct manufacturing costs. A number of additives and packaging materials make up the rest.


Morris sees little problem in raising credit for any deals, but said that given the company's share price -- down about 40 percent this year, and now valuing STR at below $490 million -- a stock deal was not the best option.

"I do understand the institutional and high-yield markets are very tough now," he said.

"But we're in the process of lining up a revolving credit line and we're using a syndicate of local banks ... I'm finding the market to be rather receptive to us."

However, product prices remain a concern for the Enfield, Connecticut-based company.

"All customers are asking for lower prices," noted Bob Yorgensen, a 25-year STR veteran who heads the solar business.

"We are addressing the landscape by offering products at a lower price point. Those products would, of course, not have 100 percent of the advantages that our flagship products have," he said.

Reporting by Krishna N Das in Bangalore; Editing by Ian Geoghegan

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