Hanwha ousted from REC Silicon's board

REC Silicon's plant in Moses Lake, Wash. / Courtesy of REC Silicon

Hanwha Group, the largest shareholder of REC Silicon with a 33.3 percent stake, was defeated by the Norwegian firm's minority shareholders in their latest proxy fight, losing control of the silicon materials maker's board to Water Street Capital, a U.S. hedge fund allied with retail investors.

The outcome could derail Hanwha's 925 million Norwegian krone ($91 million) tender offer, which was aimed to fully acquire REC Silicon and delist the company from the Oslo Stock Exchange.

At REC Silicon's annual general meeting in Norway on Wednesday (local time), Water Street won approval for its proposal to appoint five new board members, ousting those appointed by Hanwha, which is not only REC Silicon's largest shareholder but also its largest creditor and primary customer.

The U.S. firm also secured approval for an investigation into the termination of REC Silicon's supply agreement with Hanwha Q Cells in January. The termination followed the abrupt shutdown of REC Silicon's Moses Lake plant in the U.S. late last year, which led the company's stock price to plunge 50 percent on the first trading day of this year — from 3.59 krone to 1.79 krone.

Separately, a motion has been filed with a Washington state court to summon REC Silicon CEO Kurt Levens for sworn testimony, as former employees of the Moses Lake plant allege Hanwha deliberately sabotaged production at the facility.

"For the first time, a coalition of minority shareholders has successfully wrested control from a dominant majority shareholder at the general meeting of a publicly listed Norwegian company," one of REC Silicon's minority shareholders told The Korea Times.

Water Street said in a statement that it hopes Hanwha will work with it constructively for the benefit of all shareholders.

"We do not believe that shareholders were given proper information regarding the value of the company and its assets when asked to vote in favor of the drastically undervalued 2.2 krone offer from Anchor," Gilchrist Berg, founder of the U.S. hedge fund, said.

Anchor, a company established by Hanwha for the tender offer, has extended the June 24 deadline for the offer to July 8.

Hanwha Group's headquarters in Seoul / Courtesy of Hanwha Group

Despite criticism that the proposal is a lowball offer, Hanwha has not raised the offer price of 2.2 krone, citing the decline in REC Silicon's asset value after the suspension of polysilicon production, lower stock price targets set by European analysts and the board's recommendation.

"Should the voluntary offer not be completed, Hanwha may no longer be able to provide additional funding to REC Silicon," Hanwha Corp. CEO Yang Ki-won and Hanwha Solutions CEO Nam Jung-woon said in an email to REC Silicon shareholders Tuesday.

"If any change to composition of the board that is not supported by Hanwha takes place and the offer is not completed, Hanwha will not provide any further loans to REC Silicon."

However, REC Silicon's share price surged 23.56 percent to 2.58 krone after the shareholders' meeting on Wednesday, making it more difficult for Hanwha to acquire control of the Norwegian firm at 2.2 krone per share.

"In a period where the company needed continuity and stability at board level, both Hanwha and the offeror deeply regret the outcome of the annual general meeting of the company held on June 25, where a board not supported by Hanwha was elected," REC Silicon said in its regulatory filing Wednesday.

"As a consequence, Hanwha will provide no further loans to the company without the offer being completed."