JA Solar's (JASO) Merger Deal Receives Shareholders' Nod

JA Solar Holdings, Co., Ltd.’s (NASDAQ:JASO) shareholders recently gave their approval for its pending merger agreement, under which an investor consortium is set to purchase the company. This, in turn, might result in faster de-listing of the company from NASDAQ Global Select Market and thereby going private.

A Note on the Deal

In November 2017, JA Solar announced that it has signed a merger agreement with JASO Holdings Limited (Holdco), JASO Parent Limited (Parent) — a wholly owned subsidiary of Holdco — and JASO Acquisition Limited (Merger Sub), a wholly owned subsidiary of Parent. The investor group stated that it will pay $1.51 per share in cash without interest to ordinary shareholders of JA Solar.

Per the agreement, an investor consortium will purchase JA Solar in an all-cash transaction, thus translating into an equity value of approximately $362.1 million. (Read More: JA Solar Signs $362M Agreement, Set to Go Private).

Our Take

The latest transaction is expected to close in the first quarter of 2018. We believe, now that the company has received shareholders’ approval for the deal, the completion of the merger will likely be in time by the end of the first quarter.

However, JA Solar announced that about 56.5% of the company’s total outstanding ordinary shares were presented at shareholders’ meeting and 90% of them voted in favor of the deal. This means that the remaining 43.5% stakeholders are yet to give their verdict for the agreement.

Prior to the meeting, JA Solar declared that it had received written notices of objection validly served by shareholders who represent more than 10% of the company’s total outstanding ordinary shares.

Per the terms, if the holders of more than 10% of ordinary shares serve notices of objection, the deal may not see the light of the day. The buying side now has 10 business days to decide on whether to grant an irrevocable waiver of this condition.

We believe that the Chinese government’s recent initiatives to boost private firms in investing into infrastructure projects have been a major driving factor behind JA Solar’s decision to go private. However, a lack of unanimous shareholders’ approval for the deal now seems to have put the fate of the merger in uncertainity.

Price Movement

In a year’s time, JA Solar’s shares have gained 50.1% against the broader industry’s gain of 58.1%. The underperformance may have been caused by challenges that the company faces in the solar industry like the anti-dumping policies by the United States and fierce competition in China.

Zacks Rank & Key Picks

JA Solar has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector are SolarEdge Technologies (NASDAQ:SEDG) , Renewable Energy Group (NASDAQ:REGI) and CNOOC Limited (NYSE:CEO) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SolarEdge pulled off an average positive earnings surprise of 31.93% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings moved up 72 cents over the past 90 days.

Renewable Energy delivered a positive earnings surprise of 34.09% in the last reported quarters. The company boasts a solid long-term earnings growth rate of 15%.

CNOOC came up with an average positive earnings surprise of 746.10% in the last four quarters. The Zacks Consensus Estimate for 2018 earnings moved north $1.90 over the past 90 days.

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