GCL-Poly Shares Tumble as $1.9 Billion Unit Sale Collapses

(Bloomberg) -- China's GCL-Poly Energy Holdings Ltd. sank to the lowest level in more than nine years as a deal for the company to sell a controlling stake in its polysilicon unit worth $1.9 billion to Shanghai Electric Group Co. fell apart.

Shares of GCL-Poly in Hong Kong fell 7.6 percent to close at HK$0.61, the lowest since March 2009, paring an earlier loss of as much as 9.1 percent. Dollar bonds of subsidiary GCL New Energy Holdings Ltd. also came under pressure, with the 2021 notes falling 2.9 cents on the dollar to 86.5 cents as of 6 p.m., the steepest drop in two months, according to Bloomberg-compiled prices. Shanghai Electric's shares ended 1.6 percent higher at HK$2.56.

GCL-Poly and Shanghai Electric said Friday that the size and complexity of the transaction made it difficult for them to reach a full agreement on terms in a short time frame, according to separate exchange filings. They also said the timing and conditions were not favorable for the planned deal, which was announced in June.

To read a Bloomberg Intelligence reaction piece to the termination, click here.

The proposed sale came on the heels of China's decision to halt some solar plant approvals this year and curb subsidies, triggering concerns of a global slowdown in the solar power industry. Policy makers are seeking to constrain a boom in solar installations after a record expansion last year that left it with a capacity surplus and hefty subsidy bills.

Uncertainty about the impact of new policy for the photovoltaic industry made it difficult for the two companies to reach an agreement within a short period of time, Shanghai Electric said in a Monday evening exchange filing, which outlined topics discussed at a investor briefing that morning.

The deal “may have been overvalued, especially after China's solar policy shift,” said Louis Sun, an analyst at BOCOM International Holdings Co. in Shanghai. “It's difficult for Chinese solar makers to sell their assets as their profitability has become uncertain.”

GCL-Poly, the world's largest manufacturer of solar wafers, had reached a framework agreement in June to sell 51 percent of Jiangsu Zhongneng Polysilicon Technology Development Co. to the utility. The entire unit was valued at as much as 25 billion yuan ($3.7 billion), the companies said at the time.

The termination “will be negative for GCL-Poly and we're pessimistic about its outlook” amid the possible downturn in the industry, said Robin Xiao, a Hong Kong-based analyst at CMB International Capital Corp.

--With assistance from Cathy Chan, Lulu Shen and Annie Lee.

To contact Bloomberg News staff for this story: Feifei Shen in Beijing at fshen11@bloomberg.net

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Jasmine Ng

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