Sunpower International, a wholly-owned subsidiary of Sunpower Group, has disposed of its manufacturing and services (M&S) business for a consideration of RMB2.29 billion ($463.0 million).

The company, on Dec 31, entered into a sale and purchase agreement with Nanjing Sunpower Holdings, where the latter will acquire the entire issued and paid-up share capital of Sunpower Technology (Jiangsu) Co, an indirect wholly-owned subsidiary of Sunpower Group.

By disposing of the shares, Sunpower Group says it will dispose the entire M&S business and all of the group’s property, assets, rights, undertakings and liabilities under the business.

The consideration represents a historical FY2019 price-to-earnings ratio (P/E ratio) of 12.2 times and represents a premium of 21.2% to 32.7% over the independent valuation of the M&S group as at Sept 30, 2020 of RMB1.73 billion to RMB1.89 billion.

The consideration will be paid in two tranches. The first, amounting to RMB1.60 billion or 70% of the consideration, will be paid to Sunpower International within 20 business days once the shares have been transferred.

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The second tranche, amounting to some RMB687 million, or the remaining 30%, will be paid to Sunpower International within 20 business days once all the corporate guarantees granted by M&S subsidiaries in respect of relevant loan facilities in favour of the GI subsidiaries have been discharged, or the relevant loan facilities replaced or repaid. 

The company says it intends to declare a special dividend of about RMB1.34 billion to its shareholders.

On a fully diluted basis, the proposed special dividend amounts to about RMB1.16 (or 23.59 cents) per share.

The balance of the net proceeds of about RMB2.02 billion will be used for undertaking the existing green investment projects and general working capital purposes, and repaying the existing payables under the M&S business.

Sunpower’s M&S business involves the manufacturing and provision of high-end customised environmental protection products and solutions. These include heat exchangers and pressure vessels, heat pipes and heat pipe exchangers, pipeline energy saving products and related environmental protection products, and solutions for flare and flare gas recovery systems, zero liquid discharge systems for high-salinity wastewater, petrochemical engineering and thermal power engineering.

The group’s M&S business and its other business division, the GI business, which involves the supply of industrial steam to a range of diverse industries, are distinct and independent business divisions with its own sets of customers and suppliers.

Nanjing Sunpower Holdings is a special purpose vehicle incorporated in China on Sept 8, 2020, with a registered capital of RMB250 million. It was incorporated to undertake the proposed acquisition of the M&S business.

The shareholders in Nanjing Sunpower Holdings are Guo Hong Xin, Sunpower Group’s executive chairman, and Ma Ming, Sunpower Group’s executive director. They both each hold a 50% stake in Nanjing Sunpower Holdings.

Following the proposed disposal, Guangdong China Science and Tech-innovation Capital Management, CICC Alpha (Beijing) Investment Fund and its related corporations, and other PRC funds and independent minority investors will hold a 64.05% stake in Nanjing Sunpower Holdings, while Guo, Ma, and other employees of the M&S business will hold 35.95%. Guo and Ma will each hold 14.9% in Nanjing Sunpower Holdings.

The proposed disposal is said to be a good opportunity to unlock value for the shareholders and to realise its investment from the M&S business.

Shares in Sunpower closed flat at 80 cents on Dec 31, 2020.