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Ballard Power (BLDP) to Divest Non-Core Assets in Protonex

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Ballard Power Systems, Inc. (BLDP - Free Report) has entered into a definitive agreement with Revision Military Ltd., a private U.S.-based company, to sell certain non-core assets of its subsidiary, Protonex, with regard to its Power Manager business. The company will receive a total of $16 million in cash as sale consideration. However, it will still retain certain assets related to fuel cell propulsion systems for military and commercial unmanned vehicles.

The company will get an upfront consideration of $4.75 million in cash and note after the customary working capital adjustment. Also, the remaining consideration of $11.25 million will be obtained based on the achievement of specific sales objectives during a 12-month earn-out period. The company expects the transaction to be closed in next 60 days, subject to customary closing conditions.

Ballard Power’s Focus on Fuel Cell Technology

The company acquired Protonex in 2015 for a consideration of $17.5 million in shares and cash to ramp up its inorganic growth profile by providing a strategic diversification and engaging the U.S. military complex as a potential customer for portable fuel cell products. However, on account company’s portfolio optimization strategy to focus more on fuel cell technology, it is selling off a certain non-core asset. The divestiture will reduce complexity for the company, and also fetching funds for it to invest in the core fuel cell business.

Recently, the company announced that it has entered into a strategic collaboration with Weichai Power Co., Ltd. wherein Weichai will buy nearly 19.9% equity stake in the company for a consideration of $163 million (a 15% premium over the 30 day’s value weighted average price). Both companies will establish a joint venture to support China’s burgeoning Fuel Cell Electric Vehicle (“FCEV”) market. Also, Weichai plans to build and supply more than 2,000 fuel cell modules for commercial vehicles in China.

Also, in order to expand the company’s capacity to meet its growth needs over a period of next five years coupled with an increasing order backlog, which stands at $283.3 million at the end of second-quarter 2018, the company acquired certain strategic assets in Automotive Fuel Cell Cooperation Corporation (“AFCC”), a private company owned by Daimler AG (Daimler) and Ford Motor Company (Ford).

Fuel Cell Market Outlook

Per U.S. Department of Energy, during the 2018-2023 period, the fuel cell market is expected to witness a CAGR of more than 28%, reaching an industry value of $14 billion by 2023 from the base level of $3 billion in 2017. Currently, North America and Europe are the largest users of fuel cell in the global market while the Asia Pacific region is expected to witness a high-growth rate over the coming six years.

To reduce carbon emissions from diesel-powered vehicles, demand for fuel cell electric vehicles is rising by the day. To this end, California Governor Jerry Brown announced to make five million zero-emission vehicles operational by 2030 under his California Sustainable Freight Action Plan. This in turn, boosted the market for fuel cell energy already in the state. Also, in this regard, the government proposed an investment of $2.5 billion, expected to build 250,000 vehicle charging stations along with 200 hydrogen fueling stations in California by 2025.

Courtesy of inherent zero emissions, FCEVs are increasingly favored over diesel-powered conveyance. Naturally, the growing popularity of this technology allows fuel cell producers like FuelCell Energy, Inc. (FCEL - Free Report) and Plug Power Inc (PLUG - Free Report) to receive new contracts for supplying fuel cell units.

Price Movement

In the past six months, shares of Ballard Power have rallied 11.3%, outperforming its industry’s rise of 3.4%.



Zacks Rank

Ballard Power currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
 

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