The Battle for REC Silicon: Activism, Expertise, and the Fight for Value

The struggle over REC Silicon ASA (RECSOL.OL) has crystallized into a high-stakes corporate governance battle, pitting Water Street Capital's slate of independent director nominees against Hanwha Solutions' (009200.KS) undervalued takeover bid. At its heart lies a question of whether shareholders should accept a fire-sale price for a company with strategic assets in the semiconductor and renewable energy sectors or trust a new board to unlock its true potential.

A Company in Flux

REC Silicon, headquartered in Norway, operates polysilicon plants in the U.S. and Norway, producing materials critical for semiconductors and solar panels. Despite its niche role in high-growth industries, the company has struggled financially: a Q1 2025 net loss of $14.7 million and a $29.7 million revenue drop highlight operational challenges. Hanwha's bid to acquire all shares at NOK 2.20 ($0.21)—a price Water Street argues undervalues the company by over 90%—has intensified the debate.

The Nominees: A Blueprint for Renewal

Water Street's five nominees bring expertise tailored to REC's challenges:

1. Dave Keck: A polysilicon industry veteran who restructured $1.1 billion in debt at GT Advanced Technologies. His experience is vital for addressing REC's $400 million debt burden.
2. Chris Greig, PhD: A chemical engineering pioneer with a focus on carbon capture and energy innovation. His work aligns with REC's intellectual property in silane gas purification, a technology with applications in advanced semiconductors.
3. John Adams: A finance expert with private equity and corporate roles. His skills could help navigate REC's liquidity crisis, which includes a recent $10 million short-term loan from Hanwha.
4. Karina Fossmark: A restructuring lawyer specializing in distressed debt. She could challenge Hanwha's termination of a $40 million supply deal with REC's Moses Lake facility, which critics argue was orchestrated to weaken the company.
5. Jane Power: A strategic advisor with a focus on corporate governance and innovation. Her presence underscores the push to modernize REC's board and prioritize long-term value over short-term gains.

Why Hanwha's Bid Falls Short

Hanwha's NOK 2.20 per share offer ignores $100 million in deferred tax assets and the strategic value of REC's facilities. The Butte, Montana, plant—operating at 60% capacity—could expand production to meet rising demand for silicon anodes in electric vehicles and 5G semiconductors. Hanwha's own actions, including abruptly ending a decade-long supply agreement with REC, have raised red flags about its motives.

Water Street's argument hinges on a stark contrast: Hanwha's bid prioritizes its own solar manufacturing interests, while an independent board could leverage REC's IP and infrastructure for higher-value applications. The 28% premium Hanwha cites over recent trading prices is misleading, as REC's shares have been artificially depressed by Hanwha's influence.

The AGM: A Crossroads for Shareholders

At the June 25 AGM, shareholders must decide whether to elect Water Street's nominees or accept Hanwha's takeover. Voting for the independent slate would:
- Preserve REC's independence, allowing it to explore partnerships or asset sales that better reflect its value.
- Reform governance, addressing conflicts of interest in the current board, which includes Hanwha executives.
- Unlock latent potential, such as REC's role in next-gen silicon for EV batteries (projected 18% CAGR growth).

Investment Implications

For investors seeking long-term value, supporting Water Street's nominees is critical. A “no” vote on Hanwha's bid creates space for REC to:
- Negotiate better terms for its Butte facility, which has untapped capacity for semiconductor-grade polysilicon.
- Leverage its IP portfolio, including patents for silane gas production, a material essential for advanced chip manufacturing.
- Avoid delisting, which would remove public market scrutiny and shareholder accountability.

While the short-term risk of operational instability exists, the undervalued bid presents a contrarian opportunity. Shares trading near NOK 2.0—just below Hanwha's offer—could rebound if the board change reinvigorates the company's prospects.

Conclusion

The REC Silicon battle epitomizes the power of shareholder activism to challenge undervaluation and corporate capture. Water Street's nominees offer a credible path to preserve the company's independence and capitalize on its strategic assets. The AGM vote is not merely about governance—it is about whether REC Silicon's future lies in being a footnote to Hanwha's solar ambitions or a leader in the next wave of semiconductor innovation.

For investors: Support the nominees. The long game favors those who bet on expertise over expediency.

Disclosure: This analysis is for informational purposes only and does not constitute investment advice.