Total SA, Europe’s third-biggest oil producer, agreed to buy as much as 60 percent of SunPower Corp. for $1.38 billion, to take advantage of increasing global interest in clean energy.
SunPower, the second-largest U.S. solar panel maker, described the deal price, $23.25 a share, as a “friendly tender” in a statement yesterday. SunPower surged 40 percent to $22.53 by 6:20 p.m. after the close of regular trading on the Nasdaq Stock Market.
The deal may lead to additional acquisitions within the solar industry as U.S. and European suppliers seek help competing against rival suppliers in Asia, said Kevin Landis, portfolio manager at Sivest Group Inc.
“This is exactly what SunPower needed to compete with the Chinese manufacturers that are getting so much support from their government,” Landis said in an interview. “It also allows SunPower to double down on the technology improvements they’ll need to compete in the long run.” San Jose, California-based Sivest held about 17,000 shares of SunPower at the start of this year.
This deal may trigger a wave of similar acquisitions by oil companies that consider renewable energy manufacturers a way to improve their clean energy credentials, and to profit when surging crude prices reduce demand for fossil fuels, said John Hardy, an analyst at Gleacher & Co. in New York.
“This makes a lot of sense for Total, given the global shift to renewable energy, increasing concerns about nuclear power, and high natural-gas prices in Europe,” Hardy, who has a “buy” rating on SunPower, said in an interview. “It’s a natural hedge against high oil prices and depleting reserves.”
SunPower’s solar power plants also become more profitable because Total has cheaper borrowing costs, Hardy said.
Jesse Pichel, an analyst at Jefferies Group Inc. in New York, said other solar companies may also be acquisition targets. “This group is undervalued and at least some people recognize the value,” he said in an interview.
Other solar companies increased after the announcement.
China’s Suntech Power Holdings Co., the world’s largest solar panel manufacturer, rose more than 7 percent after the close of regular trading in New York yesterday. China-based Canadian Solar Inc. and Tempe, Arizona-based First Solar Inc., the world’s largest thin-film solar panel maker, both rose more than 6 percent on the news.
The offer includes both SunPower’s Class A and Class B shares. It represents a 46 percent premium over the April 27 closing price for SunPower’s Class A common stock and a 49 percent premium for its Class B common stock, and values SunPower’s total equity at $2.3 billion.
Total will also provide SunPower with as much as $1 billion of credit support over the next five years.
The transaction is subject to approval from the boards of both companies, and must receive approval from both U.S. and European Union antitrust authorities. SunPower said its current management team will remain intact.
Closing is also conditional on Total’s final offer including at least 50 percent of SunPower’s shares, the companies said.
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