Hoku Soars; Tianwei New Energy To Take Majority Stake

Hoku Scientific (HOKU) shares are soaring in early trading after the company late yesterday announced a deal that will give China-based Tianwei New Energy a majority stake in the struggling polysilicon provider. The deal also provides for debt financing from Tianwei and China Construction Bank for construction of the the company’s polysilicon plant in Pocatello, Idaho.

Terms of the deal call for conversion of $50 million of an aggregate $79 million pre-payments from Tianwei to Hoku for polysilicon into HOKU common and warrants. Tianwei will also provide $50 million in debt financing. Under a provision of the deal, Hoku will cut the price at which Tianwei buys polysilicon under their supply agreement by about 11% a year.

Hoku will issue Tianwei 33,379,287 new shares, giving it a 60% stake in HOKU’s common. Tianwei also gets 10 million warrants to buy additional shares at $2.52 a share. Tianwei has agreed to a one-year lock of 70% of its shares. With completion of the transaction, Tianwei will hold four of the company’s seven board seats.

<!----> <!---->Hoku says the deal is “the only viable option to avoid a Chapter 7 bankruptcy” and liquidation of the polysilicon business.

HOKU today is up $1.79, or 83.6%, to $3.93.