Hanwha regains REC Silicon control in return for $6.5 million loan offer

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

Hanwha Group's proposal to appoint three new board members at REC Silicon, including a new chairman, was approved at an extraordinary general meeting of the Norwegian silicon materials maker's shareholders on Thursday (local time).

The outcome enables the Korean conglomerate to regain control of the Norwegian firm, which it lost in June to the U.S. hedge fund Water Street Capital.

At the previous meeting of REC Silicon shareholders, the U.S. hedge fund, allied with Norwegian minority shareholders, defeated Hanwha and ousted board members appointed by the Korean company.

The proxy fight erupted after a group of minority shareholders objected to Hanwha's plan to acquire all outstanding shares of REC Silicon for 2.2 Norwegian krone ($0.22) per share and delist the company from the Oslo Stock Exchange.

The plan followed an abrupt shutdown late last year of REC Silicon's Moses Lake plant in the United States, which also angered minority shareholders due to the resulting plunge in the company's stock price.

The backlash from minority shareholders eventually left Hanwha with only a 44 percent stake in REC Silicon as of last month, prompting the company to continue its efforts to acquire remaining shares.

However, REC Silicon's board, led by Water Street Capital, later acknowledged that financial support from Hanwha remained the only realistic financing option for the Norwegian firm in a critical situation.

"The board has considered the election of a new board to be in the best interest for the company and its shareholders," REC Silicon's board of directors said in a July 16 statement.

"The independent board member Jens Ulltveit-Moe and the company's second largest shareholder, Water Street Capital, agreed to support the election of a new board of directors, including a new chairman, to be proposed by Hanwha, provided that a binding agreement is entered into pertaining to Hanwha's potential financing of at least $6.5 million by July 21."

Two days later, REC Silicon announced that it entered into a $6.5 million short-term loan agreement with one of Hanwha's affiliates to fund the company's urgent operational capital needs and cover expenses through July and into the first week of August.

Still, Norwegian retail investors are denouncing Hanwha's tender offer as a "shameless lowball offer."

However, market observers expect Hanwha's ongoing tender offer to gain traction with Water Street's support and its renewed control of REC Silicon.