REC Silicon's Board Shake-Up: Strategic Implications for Shareholder Value and Takeover Dynamics

The corporate governance battle at REC Silicon ASA has reached a critical juncture, with Hanwha Group's proposed board composition poised to reshape the company's strategic trajectory and influence ongoing takeover dynamics. As the extraordinary general meeting (EGM) on August 7, 2025, approaches, investors must grapple with the implications of this board shake-up for shareholder value, operational stability, and the broader silicon materials market.

Hanwha's Strategic Gambit: Control vs. Collaboration

Hanwha's proposed board, outlined in a July 17, 2025, stock exchange announcement, reflects its intent to reassert control over REC Silicon. The Korean conglomerate, which owns a 33.33% stake in the company, has long positioned itself as a key financial and operational partner. Its proposed directors, however, have drawn sharp criticism from minority shareholders, who argue that the composition prioritizes Hanwha's interests over those of the broader investor base.

The crux of the dispute lies in Hanwha's April 2025 all-cash takeover offer of NOK2.20 per share (approximately $88.6 million), which critics label a “lowball” bid. Water Street Capital, a 8.26% shareholder, has spearheaded a counter-movement, arguing that Hanwha's offer undervalues REC's high-purity silicon gas and polysilicon assets—critical components in the $3.6 billion silicon anode battery market. The new board, elected in June 2025, has initiated an internal investigation into Hanwha's alleged manipulation of the Moses Lake facility's operations, including claims of forced employee turnover and procedural changes designed to trigger the termination of a 10-year supply agreement with Hanwha Qcells.

The New Board's Counterstrategy: Transparency and Shareholder Empowerment

The newly elected board, led by independent directors such as Jens Ulltveit-Moe and Karina Fossmark, has adopted a dual approach: challenging Hanwha's governance dominance while exploring alternative value-creation avenues. Key initiatives include:
1. Investigating Hanwha's Influence: Uncovering whether the testing entity that terminated the supply agreement had ties to Hanwha and whether the company fulfilled its disclosure obligations.
2. Exploring Strategic Partnerships: Engaging with firms like Sila Nanotechnologies and Group14 Technologies to unlock the potential of REC's silicon anode and semiconductor-grade materials.
3. Legal and Regulatory Advocacy: Pursuing U.S. and Norwegian legal channels to challenge the validity of the Transaction Agreement (TA), which restricts the board's ability to seek higher bids.

The board's efforts have been bolstered by a coalition of minority shareholders holding 26% of shares, granting it significant proxy voting power. This has forced Hanwha into a defensive position, with the conglomerate warning it may cease financial support for REC Silicon if it loses board control. Such threats highlight the precarious balance of power, as the company reportedly lacks sufficient liquidity to sustain operations beyond 2025.

Regulatory and Legal Crossroads: A Tipping Point

The Norwegian Takeover Authority's upcoming ruling on the TA's restrictive clauses could prove decisive. If invalidated, the board could pursue higher bids or strategic partnerships, potentially unlocking value in REC's underutilized Butte, Montana plant and $100 million in deferred tax assets. Meanwhile, U.S. regulators, including the SEC, are scrutinizing Hanwha's alleged contract manipulation and transparency lapses.

Water Street Capital's U.S. District Court petition, seeking expedited discovery, adds another layer of complexity. A favorable outcome could expose Hanwha to litigation in Norwegian courts, further eroding its leverage. Investors should monitor these developments closely, as they could catalyze a shift in governance dynamics.

Investment Implications: Navigating Uncertainty

For investors, the board shake-up presents both risks and opportunities. If Hanwha's takeover succeeds at NOK2.20, the stock may trade at a discount to intrinsic value, reflecting undervalued silicon assets. Conversely, a successful challenge to Hanwha's influence could drive the share price higher, aligning with the growing demand for silicon materials in energy storage and semiconductors.

Key Considerations for Investors:
- Short-Term Volatility: Legal and regulatory outcomes will likely drive near-term price swings. A ruling in favor of the new board could trigger a 20–30% upside.
- Long-Term Value: The company's silane gas and polysilicon assets are positioned to benefit from the 47.1% CAGR in the silicon anode market through 2030.
- Governance Reforms: A board focused on transparency and stakeholder collaboration could enhance operational efficiency and investor confidence.

Conclusion: A Battle for Corporate Soul

REC Silicon's board shake-up is more than a governance dispute—it is a test of corporate ethics and strategic vision. Hanwha's push for control contrasts sharply with the new board's emphasis on accountability and value creation. For investors, the outcome will determine whether the company becomes a casualty of shareholder oppression or a catalyst for innovation in the silicon materials sector. As the August 7 EGM looms, the stakes have never been higher.