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Suzlon’s Acquisition of Repower AG.:

A Thrilling Takeover Battle
Thankful for drawing an attention, the world’s fifth largest windmill maker Suzlon Energy Ltd.
Chairman and managing director Tulsi R. Tanti is waiting in the conference room on 02 Jan 2007. The
rest of his group is yet to arrive. One of the secretaries had stopped and talked for a while about the
last acquisition by the company which is Hansen Transmission International a Belgium based company.
Tulsi R. Tanti, alone on the room, slid a little farther down in his chair, looking for the Board meeting
with some major propositions and the board assembled. And board concerned about the long-term
strategy of the firm and Tanti proposed a new merger with REpower Systems AG. A German wind
turbine manufacturer to explore the new expertise in offshore wind technology and increasingly firm
foothold in Europe which is one of the major market in the world. They conduct a final review of the
terms of the proposed merger between the two companies. The board agreed and issued a press
release on the next morning.

The game of thrones started here between the Indian company Suzlon Energy Ltd. and Paris-
based nuclear major Areva the No 1 maker of Nuclear Reactors and Suzlon counter bid the Areva at
the bid price of €150 per share. Suzlon’s victory gave a severe blow to Areva’s future strategies on
long-term renewable energy ambitions. The last two successful acquisition of Suzlon make them
experienced integrator of the firms. The counterparty CEO Wulf Bernotat the both boards are agreed
and the merger takes place at 21 June 2007. Kanti had earned a skills that perform complex integration
process for particularly when they required of amalgamation of the Employees and transfer of new
Wind Turbine technology. Kant and the Board felt that acquisition of the RePower would lead to
Synergies that are will became a global wind energy player, Strong R&D and high growth potential.

Kanti had also had concerns with finance which competing with large firm and achieving true
synergies factors like Positive launch of trading activities in Central/Eastern Europe and the
Technology integration and the both teams are confident on the leadership vision and employee
bonding towards company. The Takeover is completely cash takeover by €1.22 billion cash offer for
Repower. Tanti worked steadily on drafting a long-term strategy of expanding the family-owned wind
business by acquiring the leading technologies available in the world and establish a business model
based on fully vertical integrated in-house production. To develop the supply chain is the Key
Bottleneck for the company. The supply of the component is available with Suzlon and this can boost
growth opportunity for Repower and they can redefine their position in the market.

Undoubtedly these two companies can bring the synergy but the fear was Global economic crisis
which may lead to reduce revenue because of Europe is like a quasi-America where the greater reflects
in their balance sheet. These are uncertain times for the global economy. With the global credit crunch
and major economies in recession, the business landscape is changing dramatically worldwide.
Industry Background:

All things considered, Rapid developing countries like India and China saw uplifted financial action
with fast urbanization, expanding discretionary cash flow and better quality of living. All this has put
tremendous pressure on the environment and the natural resources available therein. The Worries of
United Nation Environmental programme (UNEP) for a sustainable economy and Global Waring had
increased and ascend to concern and rise of policies and great determination towards the cause
Climate Change and development of the sustainable renewable energy sources.

Naturally, these reforms boosted the Renewable industry the competitors of Suzlon in global was
mentioned In the Exhibit 1 with their percentages.

Indian renewable energy sector is ranked 4th in the world. As of 2007 March India is ranked 6th installed
renewable energy capacity. As (shown in the Figure 1.A) Installed renewable power generation
capacity has increased at a fast pace over the past few years, posting a CAGR of 14.78 per cent
between FY07–08. The market size of the Indian renewable industry is 65 billion units in FY07 and 76
billion units during April 2008 in India.

The annual market of wind power in 2007 is 19866 MW/a is expected to be 26721 MW/a in 2008
(Shown in Figure 1.B) and the total installed capacity in 2007 is 94GW (Shown in Figure 1.C) and
likewise growth rates of each particular energy was shown in (Shown in Figure 1.D).

The critical areas are to be focus for delivering better and reliable energy is to global firms are keen to
develop and maintain these factors in the 21st century. The key activities are:

1. In-house Technologies and design capabilities with advanced technology.

2. Cost efficient manufacturing and supply chain 3.0 (Digitalization)
3. Operations and maintenance expertise.
4. Focus on providing integrated solutions on step process.
5. Expanding its presence in international Growth Market.
6. Growing its business through strategic acquisitions and alliances.
7. Risk management and internal control adequacy and
8. Include reliability, product quality, technology, price, and the scope and quality of services,
including O&M services and training offered to customers.

These are the critical issues in the global market in order to pertain the market sustainability and
excellence.

The in-house technology and cost efficient is main restraint for the renewable industry because of the
cheap unit production of the electricity by the fossil fuel and the integration of the services enables
company to achieve the economies of scale and reduce in per unit cost.

The central and state government provide some reliefs and incentives on the renewable industries are
1. Import duty concession on specified wind turbine parts. 2. 80% accelerated depreciation 3. Loans
through IREDA and state government proposes 1. Fiscal and financial incentives 2. Capital subsidies
and sales tax incentives in certain states. 3. Buy-Back facility b state electricity board.
Suzlon Energy:

The 47 year old Indian entrepreneur started a company at millennial era with sharp vision and long
term strategy to achieve excellence in renewable energy and reduce the carbon footprints in the
globe and make world as sustainable to future generation by the moto of “One Earth” and where
the Mr Tulsi R Tanti established a Suzlon energy in 1995 at Gujarat Ahmadabad. Suzlon Energy is the
India's largest renewable energy solution provider which is present in eighteen countries across 6
continents and 8,000 employees globally.

The company is one of the leader in business of WTG so called Wind and Turbine generators with
variety of ranges of capacities of products which is shown in Figure 2.A. Suzlon’s is vertically integrated
company and manufactures the blades, control panels, covers, generators, nacelles, rotors, and
towers. Their operations relate to sale of Wind and Turbine generators and the activities including
sale/sub-lease of land infrastructure development income from sale of gear boxes and sale of foundry
and forging components etc. having a strong grip on WTGs value chain and provides wide range of
O&M services that include installation and life cycle asset management services. It is market leader in
India having 12 GW of installed capacity and global installation of 18 GW spread across 18 countries
across the globe. (Exhibit 2 and Exhibit 3 are the financial statements of the Suzlon)

The Suzlon’s journey contains a few strategic decision of acquisition. They are:

• Company Formed 1995 Joint Venture with Sudwind GmbH

1995 of Germany

• North-American Subsidiary Established

2001

2005-06 IPO of 2.87 Cr of Shares and collected 1,466 crore

• Accquires Hansen Transmission International, Belgium

2005-06

• Buys Repower Sysytems, Germany in more than one Transaction

2007

The Suzlon group Ind hold a 6.9% market share in the world. It manufactured an Asia’s largest wind
park in Kutch area of Gujarat of a capacity of 800MW and 40 wind farms across 8 states. The vision is
to be the technology leader in the wind energy industry and use comprehensive R&D technology at
Belgium, Denmark, Germany and India. The manufacturing plants in India are located at the
Maharashtra, Pondicherry, Gujarat, and Daman & Diu.

The group is acting as a custodian of $13.5 billion assets all over the world and having 13 years of
operating history with 15.5 GW of Installations and achieved 100% of turbine sold in India is under
group services and 90% of turbine sold to outside is under their service with matching of consistently
above industry standards and 24x7 SCADA Monitoring and online tracking systems with the help of
IoT as a leading technological Innovator in the Indian industry. Promote the meritocracy as a part of
its Culture and creates a comprehensive compensation and benefits for employees.
RePower Systems Ag:

RePower Systems AG is founded in 2001 and generally in the business of wind turbine manufacturing
based on Hamburg, Germany. Wulf Bernotat was the CEO of the Repower Systems AG which has later
changed the name to Senvion India Pvt Ltd. and the name is used by then Swiss parent company. This
company main focus is on the “Innovation” ”Energy” and “Wind” on the baseline of Renewable
energy. (Exhibit 4 and Exhibit 5 are the financial statements of the RePower Systems AG)

The company is the one of the mechanical engineering pioneer which innovates, develop and
production of the commercial wind turbines with a range of 1.8MA – 6.15 MW and the range of the
motor diameter is 82 to 126 meters. With respect to this the company provides solution of a wide
range of integrated services like transport, installation, planning, construction, service and
maintenance the verticals which the company is operated is similar to the Suzlon’s product offerings
the main competitive advantage that the company is possessing in the market is the R&D technical
capabilities.

RePower TechCentre is located at the Osterrinfeild and manufactured at its plants in North Friesland
(Hussum) and export to the Third world countries like India, Portugal and China having more than
3,300 employees across the globe. It has a relevant experience in the wind turbine manufacturing that
gained from the manufacturing and installations from the 5,000 turbines in the countries like Italy,
Sweden, Poland, France, Portugal and the Belgium as an middle range of turbines and the countries
like USA, China, Canada and India are the base of high capacity instalments

The value Chain of the RePower systems AG:

About Repower Milestones:

1. Recognised as a Tech Leader with large foot fall in the Europe. Controls 10% the WTG German
Market Share.
2. Current installed capacity of 1,250 MW and planning to expand extra 450MW
3. Manufactures wide range of WTG (1.5 to 5 MW)
4. Presence of High-Skilled interdisciplinary Employees.
5. It is the 3rd largest WTG manufacturer in the German industry.
6. The forecasted revenue of 2006 is the EUR 450 Million.
7. Senvion’s Modular Technology enables optimization of the turbines by adjusting the
operational parameters.
Merger Detail:

The story starts from here, On 02 Jan 2007 the Board of directors Suzlon’s accepts a proposal of the
acquisition of the RePower Systems Ag and the company issues an open offer in the public on the
interest of acquisition of shares to became a majority shareholder. The RePower Company constitute
of Areva which is holding 30.15% it initially holds 9% of the company and the group Martifier holds
the 23.08% of the company. The Group Areva is the French state owned Nuclear Company is
counterbid the Suzlon in RePower Systems AG acquisition.

Suzlon’s wanted to be 4th largest player in world (WTG sector) by acquiring the RePower Systems AG

Martifier is the holding company which is having diversified business across construction, energy,
Retail & Warehousing, electricity generation and Bio-fuels. Having a top-line of €154 million in 2006
and holding a 23% of the RePower Systems AG.

The Suzlon won in the six month takeover battle with Areva. The 3 month average price of the
Repower is €90 which is determined by the Bafin. The Areva CEO Anne Lauvergeon start the bidding
at the price of €105 per share. Then 28 Feb 2007 Suzlon’s board offer the €126 counterbid to the Areva

The Suzlon’s board know that Areva has possess an advantage because it is the member of the board
of the target company. And cleverly Kanti made a relationship with the other company that called
Martifier. Finally the Areva proposed an offer at €140 per share on 15 march 2007. And Kanti
Counterbid the offer at €150 per share where the Areva is not willing to pay that premium amount
and finally the board accept the proposal of the Kanti and later the Suzlon acquired the RePower
Systems AG.

With some conditions 1. Areva can sell their shares to Suzlon after one year and 2. Martifier can sell it
shares within two years at the max €264 million to Suzlon

The main focus of the Suzlon is to be large and Technological leader in the wind industry to dominate
the global Market with cost efficient and high-Tech Products as a part of long term strategy.

 09 Feb 2007 Suzlon Acquires 33.85% stake.

 06 Jun 2008 Suzlon Acquires 30% stake
 01 Sep 2008 Suzlon Acquires 22.48% stake

Financing the Offer:

1. The expected amount for the acquisition is the €1,022,867,622 and additional cost for
acquisition is 30,000,000 in total.
2. The repower shares held by SEDT, MARTIFIER and Energy system and Suzlon offer them to pay
at 09 Feb the Suzlon make a credit agreement with the ABN AMRO BANK and the remaining
funds are drawn from the reserves. The Suzlon drawn an amount €793,208,334 from the bank.
3. The remaining shares of Martifier (2,060,788) and the amount was paid by the pledging of
shares of these three companies by entering an Agreement that Suzlon will pay all the amount
later than the working day of prior settlement day of the offer
Merger Rationale:

Understanding the vision of the company gives the insights of the merger rationale the vision of the
company is:

1. To be the technology leader in the wind industry.

2. To be among the top three wind energy companies in the world.
3. To be the most respected brand and preferred company for all stake holders.
4. To be the best team and best place to work.
5. To be the fastest growing and most profitable company in the sector.

Key Strengths will achieve:

1. To became a vertically integrated WTG company by offering comprehensive and integrated
products to customers.
2. Strategic importance for supply chain to Value chain as we discussed earlier. To ripen and
add the benefits of the economies of scale.
3. Quality assurance in the In-house manufacturing by best leveraging the best technology.
4. To enhance the EBITDA margin and put a robust balance sheet.
5. Focus on key and high growth markets to became a global leader.
6. Utilizing the R&D and innovation in order to get high customer satisfaction.

Anticipated Merger Rationale:

1. Complementary geographical presence.
2. Complementary product portfolio.
3. Complementary supply chain strategies.
4. Off-shore leadership of Repower.
5. Improve financial performance and Margins.

There is a scope of large international contract because of Repower brand value and
Technological innovation. Suzlon is experienced and successful integrator because the
integration of both companies is the growth strategy and also the last Acquisition of Hansen
International transmission improve the numbers in the income statement and increased their
capabilities of product development, Engineering, Manufacturing, R&D and geographical
presence.
And the major revenue driver and cost driver for both companies is mobilization of the Human
resources. The major synergy will be the employee expertise which was not shown in the
balance sheet but key driver for every firm and it establish a competitive advantage over other
firms. These complementing resources involves increase their efficiency through linking them
with one another and this can be achieved by blending of product design capabilities. The
board little concern about the cultural clash between the employees which might increase
attrition.
As far as board concern about the long term strategy this option is viable in nature and meet
the vision of the company to become third largest and fastest growing platform to enable
high benefits t stakeholders.
Market Insights about Wind energy Production & Consumption
 Rs. Million Mar-06
Company Name Total assets
Cheema Boilers Ltd. 464.9
Forbes Marshall Pvt. Ltd. 258.2
G E Power Services (India) Pvt. Ltd. 697.1
Indowind Energy Ltd. 716.3
Industrial Boilers Ltd. 98
RePower AG Pvt. Ltd. 24570
Suzlon Energy Ltd. 45817.6
Thermax Ltd. 13616.2
Thermax Sustainable Energy Solutions Ltd. 67.7
Vestas Wind Technology India Pvt. Ltd. 208300
Wind World Wind Farms (India) Ltd. 244.5

Exhibit 1: The largest boiler and turbine manufacture companies with their asset sizes

Figures:

Figure 1.A

Figure 1.B
Figure 1.C

Figure 1.D

Figure 2.A
Various Sizes of Turbine that Suzlon Manufactures
This figure shows a brief description about global company’s market share in the landscape of globe
and the largest market U.S.A

The Integration is a key advantage for Suzlon, setting it apart from most of its competitors. This
helps to maintain quality standards and compatibility.
Exhibit 2: The Suzlon’s Information –Balance sheets for Fiscal Years Ended December 31 (in Inr
millions)

Particulars As at March 31,

Years 2008 2007 2006 2005
Share capital 299. 288. 303. 202.
Employee stock options 10. 12. 10.
Share application money pending 0.02 728.
allotment
Reserves and surplus 06,638. 03,414. 02,509. 930.
Total 06,948. 03,713. 02,822.
Loan funds 285.
Secured loans 672. 772. 277. 37.

Unsecured loans 02,412. 365. 59. 323.

Total Loan 03,085. 01,137. 335. 01,252.
Total 10,032.40 04,850. 03,158.
APPLICATION OF FUNDS
Fixed assets
Gross block 779.20 567. 400. 218.

Less: Depreciation / amortisation 267. 179. 105. 58.

Net block 512. 388. 296. 160.

Capital work-in-progress 135. 93. 76. 18.
Total 647. 481. 372. 178.20
Investments 04,919. 805. 293. 126.00
Deferred tax assets, 94. 71. 58.00 28.
Current assets:
Inventories 01,483. 01,375. 01,104. 495.
Sundry debtors 03,307. 01,971. 01,584. 676.
Cash and bank balances 875.50 351. 316. 88.20
Loans and advances 01,289. 01,297. 691. 376.
Total 06,954. 04,995. 03,696. 01,635.
Current liabilities
Current liabilities 01,946. 01,108. 858. 529.
Provisions 636. 394. 402.50 185.60
Net current assets 04,372. 03,493. 02,435. 920.30
Total 10,032.40 04,850. 03,158. 01,252.

i.e. 2008 Financials are forecasted

Exhibit 3: The Suzlon’s Information –Income statement for Fiscal Years Ended December 31 (in Inr
millions)

Particulars Year ended March 31,

Years 2008 2007 2006 2005
INCOME
Sales 06,926. 05,380. 03,788. 1,917.50
Other income 126. 88.10 69. 23.
07,052. 546847 03,858. 01,941.

EXPENDITURE
Cost of goods sold 04,227. 03,232. 02,282. 01,141.
Operating and other expenses 953. 830.00 509. 291.

Employees' remuneration and 139. 111. 63. 35.

benefits

Financial charges 140. 101. 55. 41.30

Depreciation / amortisation 86. 73. 46. 39.

05,545. 04,349. - 0.06

PBET 01,507. 01,120. 02,955. 01,548.
Current tax 176.00 130.00 903. 392.
MAT credit entitlement (74.) (50.) 107.00 48.00

Earlier year - current tax 0.13 (11.) (28.) (17.)

Deferred tax (23.) (13.) 2.40 0

Fringe benefit tax 11. 2. 0.04 0.06
PAT 01,417. 01,061. 821. 361.
Exceptional items, 151. 0 527. 307.
NET PROFIT 01,266. 01,061. 01,348. 668.

Balance brought forward 01,478. 882. 72. 23.

Profit available for 02,744. 01,944. 72. 12.

appropriations
APPROPRIATIONS 2. 2.
Interim dividend 144. 20. 5.
Proposed dividend 150. 300.00 100.00
Dividend on preference shares 1.50 882. 527.

Tax on dividends 25. 20.

Transfer to reserve 300.00 300.00
Surplus to Bal. Sheet 02,268. 01,478.
Exhibit 4: The RePower Systems AG Information –Balance Sheet for Fiscal Years Ended December 31
(in Inr millions)
Assets (CHF thousands) CHF-Swiss Dollar 31.12.2005 31.12.2006
Property, plant and equipment 86560 77798
Intangible assets 23119 21577
Financial assets 133377 232734
Non-current assets 243056 332109
Inventories 557 613
Trade accounts receivable 145324 172760
Other receivables 187144 159130
Prepaid expenses and accrued income 34753 81096
Capital assets in current assets 54798 68794
Cash and cash equivalents 36396 55223
Current assets 458972 537616
Total assets 702028 869725
Exhibit 5: The Suzlon’s Information –Income statement for Fiscal Years Ended December 31 (in Inr
millions)

Particualrs 2005 2006

Net Sales 658159 1164248
Other Operating Income 21786 22106
Total operating revenue 679945 1186354
Energy procurement -557835 -1060701
third-party services -5649 -6897
Personnel expenses -28465 -30006
Concession fees -3364 -5286
Depreciation and amortisation -12589 -20657

Other operating exp -12566 -16884

EBIT 59477 45923
Financial income 11703 17125
Financial expense -5957 -4662
Non-operating income 523 574
Non-operating expenses -399 -431
Income before taxes 65347 58529
Gains (sale of assets) 648 6292
Extraordinary income 21911 60977
Profit before taxes 87906 125798
Taxes -24933 -49203
Net income for the year 62973 76595
The share price Fluctuations after and before the Acquisition of RePower Systems AG.

Suzlon's Share Price Chart

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INR Price

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takes place
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