* Hanwha in cash deal to buy about 50 pct of Solarfun
* Hanwha shares jump 3.7 pct after deal announced
* Solarfun Q2 adj EPS $0.59 vs est $0.25
* Solarfun raises FY shipment outlook
* Solarfun shares jump 20 pct (Adds analyst comments, details, share movement)
SEOUL/BANGALORE, Aug 3 (Reuters) - South Korea’s Hanwha Chemical (009830.KS) will acquire a 49.99 percent stake in Chinese photovoltaic (PV) cell maker Solarfun Power Holdings Co SOLF.O for 434 billion won ($370 million) to expand into new products in China.
Hanwha would pay $10.72 per American Depositary Share (ADS), or a 4.6 percent premium to Monday’s closing price of Solarfun — the world’s fourth-largest solar module producer with 900 megawatts of annual capacity.
Shares of Solarfun, which have shot up 40 percent over the past one month, jumped as much as 20 percent to a high of $12.30 Tuesday morning on Nasdaq.
“With added visibility in terms of project pipeline, I would think that Solarfun stock should get much higher valuation after the Hanwha deal,” Oppenheimer & Co analyst Gary Hsueh, who raised his price target on the stock to $17, told Reuters.
The deal marks the latest attempt by Hanwha’s parent, chemicals-to-construction conglomerate Hanwha Group, to raise its profile through acquisitions and public offerings.
Hanwha said the deal was also aimed at securing production capacity in the fast-growing Chinese market via Solarfun, whose customers include Q-Cells AG QCEG.DE and Germany’s third-largest utility Energie Baden-Wuerttemberg (EBKG.DE).
South Korea’s fourth-largest business group purchased two local units of U.S. insurer Prudential Financial (PRU.N) earlier this year for $425 million and raised $1.6 billion by taking Korea Life (088350.KS), the country’s No.2 life insurer, public in March. [ID:nTOE61A070] [ID:nTOE62G00C]
Hanwha would acquire shares directly from Solarfun as well as all the shares held by Good Energies II LP and Yonghua Solar Power Investment Holding Ltd, a company owned by Solarfun’s Chairman Yonghua Lu. Hanwha would also have three nominees on Solarfun’s board.
Solarfun also reported second-quarter profit above analysts’ estimates, helped by higher shipment volumes, and raised its 2010 shipment outlook.
The company sees its third-quarter shipment of 210MW to 220MW. It also raised its full-year shipment outlook to between 650MW and 750MW.
For the latest second quarter, Solarfun’s net income was $40.2 million, or 69 cents per American depositary shares (ADS). Total revenue more than doubled to $258.5 million.
Excluding items, the company earned 59 cents a share, against analysts’ average estimate of 25 cents, according to Thomson Reuters I/B/E/S.
S&P Equity Research raised its rating on Solarfun to “buy” from “hold,” citing the company’s greater end-market exposure, improving customer visibility, and reduction in internal cost per watt as well as the deal with Hanwha.
Solarfun shares were up 6 percent at $10.89 in afternoon trade. Hanwha Chemical shares closed up 3.7 percent at 21,250 won on Tuesday. ($1=1172.5 Won) (Reporting by Miyoung Kim and Vinay Sarawagi; Editing by Anshuman Daga, Gopakumar Warrier)