Sunday, September 9, 2012

MEMC A Takeover Target? Not Too Likely, Wunderlich Contends

MEMC Electronic Materials (WFR) shares traded higher yesterday amid speculation, yet again, that the company might be a takeover target. As Wunderlich Securities analyst Theodore O’Neill notes this morning, this is the fifth outbreak of takeover rumors involving WFR in the last year. But they haven’t been targeted yet – and O’Neill doesn’t think anything has changed this time.

WFR has three basic business segments; it makes silicon wafers for both the solar and semiconductor sectors, and it has jumped into the solar farm business via acquisition. O’Neill notes that there is a glut of supply in the solar sector, while the semi business, he writes, is “growing at an increasingly slow rate.” The diversification into solar farms provides a potential end market for the company’s polysilicon production, but he notes that the segment is getting “crowded” as other companies like First Solar do the same.

In short, he concludes that “it is difficult to see the value” of the company “as a takeover as long as margins are falling and product is in worldwide oversupply.”

He maintains a Hold rating and $15 price target on the stock, which yesterday closed at $15.51.

This morning, WFR is down 11 cents, or 0.7%, to $15.51.

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