Ballard sells unit back to automakers
Bought XCElLSIS almost 3 years ago.
In same deal, DaimlerChrysler is increasing stake in Ballard, Ford is reducing its share
CanWest News Service, July 9, 2004
Ballard Power Systems signalled a major strategy change yesterday by announcing it would sell a German fuel-cell business back to DaimlerChrysler AG and Ford Motor Co.
The Vancouver-based Ballard had bought the company from the two automakers almost three years ago.
In the same deal, DaimlerChrysler is increasing its stake in Ballard Power while Ford is reducing its holdings.
The companies say the two global automakers will be jointly responsible for the research, development and manufacture of the fuel systems designed for their cars, while Ballard will focus on the fuel stacks that make up the core of its fuel-cell systems and electric drives.
DaimlerChrysler and Ford will provide up to $58 million U.S. to fund development of the next two generations of vehicle fuel cells and the next generation of the electric drive system.
Ballard also said it will take an $18-million (U.S.) writedown in the third quarter.
CEO Dennis Campbell said the huge demand the company expected for its automobile fuel-cell systems hasn't materialized.
"When we look at the long-term potential of systems business today, what we're finding out is that the (automakers) prefer to do systems in-house and that market isn't as large as we envisioned," Campbell said.
Brian Piccioni, high-technology analyst for BMO Nesbitt Burns, said that while the financial aspect of the deal is probably good for Ballard shareholders, the positive aspects of the company's change of strategy are less clear.
"It's not obvious, despite the spin, that this is a reinforcement of these companies' (DaimlerChrysler and Ford) commitment to the hydrogen economy," Piccioni said.
He said that Ballard hyped the purchase of Xcellsis from DaimlerChrysler in October 2001.
"Less than three years later, why is divesting it so positive?"
Under yesterday's deal, if approved by the three companies' boards and various regulatory agencies, the two partners will acquire Ballard Power Systems' 50.1-per-cent interest in Ballard AG in exchange for the return to Ballard of 9 million of its common shares. The shares, valued at $80.4 million U.S., would then be cancelled.
DaimlerChrysler and Ford would then invest $55 million Canadian in exchange for about 4.5 million Ballard shares. DaimlerChrysler's ownership in Ballard Power Systems would increase to 18.8 per cent from 16.6 per cent, and Ford's ownership would decrease to 13.9 per cent from 18.7 per cent.
Shares in Ballard traded down 9 cents at $11.79 yesterday on the Toronto Stock Exchange.