MEMC and SunEdison, a tale of two companies

SunEdison has been in the news of late and with a confusing acquisition strategy, interesting financial decisions, layoffs and high debt – it is beginning to look a lot like MEMC. This is really a tale of two companies – one a raw material manufacturer and pioneer in silicon wafer technology founded decades ago, the other a pioneering developer in the commercial PV space, and how in becoming one, the combined company took on the personality of the raw material company.

In the past MEMC engaged in an aggressive acquisition strategy similar to the one currently followed by SunEdison. MEMC was a semiconductor material manufacturer and its acquisitions and expansions were capital intensive and related to its core business. SunEdison’s acquisitions and expansions are capital intensive and in renewable commercial project development (wind and solar), solar residential leasing, micro-grids in the developing world, YieldCos and storage all requiring different skill sets and strategies.

Past behavior is the best predictor of future behavior. MEMC’s history predates its PV industry activities and acquisition of SunEdison. To understand the company’s current behavior, it is important to consider its past. Some MEMC pre- and post-PV and SunEdison acquisition history:

• 1959: Monsanto Chemical Company founds Monsanto Electronic Materials Company (MEMC) as a merchant manufacturer of 19-mm silicon wafers.
• 1961: Dynamit Nobel Silicon, (DNS) builds a polysilicon and Czochralski ingot plant in Merano, Italy
• 1962: MEMC pioneers the chemical mechanical polishing process (CMP). MEMC begins using the recently developed Czochralski (CZ) crystal growing process.
• 1966: MEMC begins production of 1.5 inch wafers
• 1970: MEMC’s plant in Kuala Lumpur, Malaysia begins producing 2.25 inch wafers.
• 1979: MEMC introduces 125 mm wafers
• 1982: MEMC develops EPI wafers for CMOS applications
• 1984: MEMC begins producing 200mm wafers and builds a pilot plant to make granular polysilicon
• 1987: Ethyl Corporation acquires the FBR technology developed under its Jet Propulsion Laboratory contract by General Atomic and Eagle Picher and begins production of granular silicon. MEMC develops feeders to use the finished product and is the primary customer for FBR material. Ethyl later splits into two divisions. One of the divisions is named Albemarle (after one of the Ethyl pioneers). The Albemarle division owns the poly plant.
• 1989: Hüls AG of Marl, Germany, and a subsidiary of VEBA AG, buys MEMC through DNS naming the combined company MEMC Materials
• 1994 Ethyl Corporation spins off its Albemarle division
• 1995: MEMC acquires granular polysilicon (FBR) facility from Albemarle and renames it MEMC Pasadena
• 1995: MEMC launches IPO
• 2000: VEBA AG merges with VIAG AG to become E.ON AG
• 2000: E.ON AG increases ownership of MEMC from 53.1 percent to 71.8 percent
  
• 2000: MEMC has a net loss of 68-million Euros on revenues of 944-million Euros
• 2001: E.ON considers bankruptcy for MEMC
• 2001: The Texas Pacific Group (TPG) buys the 71.8 percent of MEMC owned by Germany Utility E.ON, restructures debt and replaces the CEO. At the time of the sale, for the symbolic amount of $1.00, MEMC stated that it only had enough cash to operate through September of that year. Texas Pacific Group agreed to revise the purchase price if MEMC improved its financial performance and to offer it debt financing
• 2002: Nabeel Gareeb is named CEO of struggling MEMC
• 2002: TPG converts preferred stock to common stock increasing its ownership of MEMC to 90 percent
  
• 2003: With perfect timing – just as growth in the PV industry begins accelerating, SunEdison is founded as a commercial PV developer of PPA projects
• 2004: MEMC enters a licensing agreement with Silicon Genesis Corp (SiGen) to manufacture wafers using SiGen’s layer transfer technology
• 2004: PV industry demand begins to surge as crystalline supplies become constrained. Prices for wafers at >$3.00/Wp
• 2006: MEMC agrees to supply Suntech Power with solar grade silicon wafers for ten years and receives a warrant to purchase a 4.9% stake in Suntech
• 2006: Polysilicon prices spike with spot prices at >$400/kilogram
• 2008: Nabeel Gareeb resigns as MEMC CEO
• 2009: BP Solar sues MEMC for ~$140-million for failing to supply the company with polysilicon in 2006 and 2007 under a three year supply agreement, winning $8.8-million
• 2009: MEMC acquires SunEdison
• 2010: MEMC acquires crystal growth technology company Solaicx for $66-million
• 2011: MEMC idles its polysilicon manufacturing facility in Merano, Italy, reduces capacity in Oregon and scales back its facility in Malaysia as well as laying off ~1,400 employees globally
• 2011: Enters a joint venture with Samsung Fine Chemicals and MEMC’s affiliate, MEMC Singapore, to produce high purity polysilicon in Ulsan, Korea using the FBR process.
• 2011: BP exits PV manufacturing
• Suntech files for bankruptcy protection
• 2013: MEMC changes company name to SunEdison
• 2014: SunEdison spins off its semiconductor business as SunEdison Semiconductor
• 2014: SunEdison launches Yieldco TerraForm
• 2015: SunEdison sells shares of SunEdison Semiconductor to help finance acquisition of First Wind, eventually would sell all shares in SunEdison Semiconductor
• 2015: SunEdison goes on a shopping spree buying First Wind, Globeleq Mesoamerica Energy, Continuum Wind Energy, Vivint and Solar Grid Storage
• 2015: SunEdison announces layoffs of 15 percent of 7260 employees

When MEMC changed its name to SunEdison it did not take on the culture and personality of the original SunEdison. MEMC essentially bought itself a fresh start through the vehicle of a name change. SunEdison is highly leveraged, adding concern to its recent capital intensive acquisition strategy. 

The company’s recent quarterly filing showed a net loss and negative operating cash flow. The company’s current ratio (an indication of its ability to pay short term debt) was below one – a poor result. The acid test ratio for the company was well below one, indicating that SunEdison does not have sufficient liquid assets to pay its current liabilities. On Oct. 19 its stock price, a measure of investor confidence, was $9.05, down significantly from the July 20, 2015, price of $31.66.

http://www.renewableenergyworld.com/articles/2015/10/memc-and-sunedison-a-tale-of-two-companies.html