BY RICHARD HEAP:
Beware of Greeks bearing gifts! In Virgil’s Aeneid, the Greeks famously ended a ten-year war with the Trojans by gifting their foes a huge wooden horse that was stuffed with elite soldiers. Then, at night, the Greeks popped out and destroyed Troy.
What can we learn from this? Well first, don’t accept big wooden horses as presents. You don’t have anywhere to put them, and they may contain military. And second, I’d like to know if the word ‘destroy’ is related to the fate that befell the Trojans. If you know better than Google’s, let me know: richard@
Thankfully, not all takeovers are this hostile. Last week, US storage company Trojan Battery Company said that its majority owner, an affiliate of Charlesbank Capital Partners, had reached a deal to sell Trojan to KPS Capital Partners portfolio company C&D Technologies.
The transaction is set to combine to two large battery makers into a business with more than $1bn revenue, eight factories and a global presence.
The combined group’s factories will be spread between the US, Mexico and China; two advanced R&D centres; and offices in Europe, Asia and the Middle East.
But why – other than my self-indulgent intro – do I think this is a deal worth covering?
Trojan track record
The first thing is the age of the acquired firm. Trojan may not be as old as the tale of the horse with which it shares its name, but it was set up in 1925 by George Godber and Carl Speer; and has been owned by the Godber family. That ownership will come to an end with this deal, which is due to conclude by the end of 2018.
It also has a long track record in battery storage. The firm brands itself as the ‘world’s leading manufacturer of deep-cycle energy solutions’, and it pioneered the development of batteries in gold carts in 1952. Golfers, now you know who to thank!
The business also manufactures a range of deep-cycle batteries for vehicles and other uses, in sectors including renewable energy. Trojan operates from US states California and Georgia. David Shapiro, managing partner at C&D owner KPS, said that he looked forward to merging C&D with Trojan to form “the global leader in the energy storage industry”.
Armand Lauzon, chief executive of C&D, called the deal a “historic moment”, where C&D and Trojan could match their “complementary portfolios of global manufacturing plants, markets and products”. He said: “This is a highly compelling combination with tremendous strategic value and an exciting multi-segment growth opportunity.”
He would say that, of course. But this opportunity to match complementary portfolios is the second reason we think this deal is of interest.
Merged product portfolios
Pennsylvania-headquartered C&D highlights its expertise in sectors including utilities, telecoms, uninterruptible power – and, like Trojan, renewable energy. The fact both companies see the renewables sector as priority means that the enlarged C&D is one to look out for.
This is a goal reiterated by Trojan chief executive Neil Thomas, who says the larger company would seek to “take a leading role as the energy storage industry rapidly evolves and grows in scale and sophistication”.
We all know the important role that storage is likely to have in the growth of the wind and solar industries globally, and so it is little surprise that C&D is looking to grow and position itself for that.
Likewise, we expect to see other companies go down a similar route as they look to position themselves for the forthcoming boom. There is a dauntingly large number of companies testing types of storage technologies, and the industry is still waiting for a shakedown once investors and developers pick their preferred solutions. As a result, it makes sense for firms to use buyouts and establish them as undisputed leaders.
And, for the firms that choose to go down that route, this diversification of technology in their portfolios is a good insurance policy too. The energy storage world may be firmly wedded to lithium-ion batteries now, but for now long? Technology changes quickly, and we expect to see firms using takeovers as a way to diversify their risks.
The enlarged C&D Technologies certainly appears to have a wide range of products and strong experience to draw from. That doesn’t guarantee success of course – like empires, businesses can grow and decline – but it looks like a solid base on which to build.