Total's SunPower bid adds shine to solar M&A

SunPower Corp
SPWRA.O
$21.50
+5.38+33.37%
11:04am PDT



Above, Sunpower facility in Richmond at the Ford Assembly Plant
By Christoph Steitz
FRANKFURT | Fri Apr 29, 2011 1:44pm EDT
(Reuters) - French energy major Total SA's landmark $1.37 billion offer for a majority stake in U.S. company SunPower Corp gave fresh impetus to hopes of more deals, lifting global solar stocks.
Total's move is one of the biggest ever by an oil and gas giant into the market for renewable energy, which has seen a resurgence of interest following the nuclear crisis at Japan's Fukushima power plant caused by last month's earthquake and tsunami.
Investors have been waiting for years for large-scale consolidation in the solar sector. But activity has been muted as the industry is still in its early stages and dependent on government subsidies to compete with fossil fuels.
Big utilities have so far shunned the sector -- which predominantly features small roof-installed systems -- in favor of large-scale wind farms that fit better into their business models.
In addition, falling government support for solar power in top markets Germany and Italy have put the sector under additional pressure.
The deal "is something we have been waiting for and with the industry gradually moving more from Germany, Italy and the rest of Europe to the U.S. and China, the utilities and power groups will get a bigger role," Jon Sigurdsen, renewable fund manager at DnB Nor Group unit Carlson, said on Friday.
"We are now becoming a lot more positive (on the sector) and we have recently bought a lot solar shares actually since start of year," he added.
Total late said on Thursday it would launch a tender offer for up to 60 percent of SunPower's outstanding Class A common shares and 60 percent of its Class B common shares for $23.25 a share.
This represents a premium of more than 44 percent to SunPower's Class A closing share price of $16.12 on Thursday. The stock soared in Friday trading and was up 34 percent at $21.62 in early afternoon trading on the Nasdaq.
"This step should fuel takeover speculation in the sector again and should drive share prices today," DZ Bank analyst Sven Kuerten said.
The shares of European solar companies were higher, with Phoenix Solar AG, Q-Cells SE, SolarWorld AG, SMA Solar Technology AG and Norway's Renewable Energy Corp up between 4.6 percent and 8.2 percent.
Among U.S.-listed solar stocks, the big gainers included U.S. solar wafer maker MEMC Electronic Materials Inc, Chinese players JA Solar Holdings Co Ltd, Hanwha Solarone Co Ltd, LDK Solar Co Ltd and Canadian Solar Inc and U.S. solar equipment maker GT Solar International Inc. All were up between 3 percent and 6.5 percent.
But analysts said stocks were mainly boosted by the expected approval of a new incentive scheme in Italy.
"People can price modules, they can price their systems as long as there is relative certainty over the next year. That is number one what is lifting the stocks," Auriga USA analyst Mark Bachman said. "The second thing is SunPower."
The Total deal comes less than three weeks after Swiss solar equipment maker Meyer Burger Technology AG launched a takeover bid for German peer Roth & Rau AG, valuing the company at 356 million euros ($528 million).
However, the deal also triggered some skepticism.
"Although this move could boost M&A activity expectations in the sector, we recommend to remain cautious ahead of the earnings season, as we are very likely to see many disappointments due to weak demand and continuing regulatory uncertainties in Europe," Bryan, Garnier & Co analyst Julien Desmaretz said.
Germany's Phoenix Solar and Q-Cells have already warned that business was hit by harsh winter weather in the first three months of the year, typically the industry's weakest quarter and LDK Solar earlier this week cut its first-quarter revenue forecast.
Even SunPower lowered on Thursday its first-quarter revenue outlook, saying Italian orders had been pushed into the second and third quarters.
(Additional reporting by Nichola Groom in Los Angeles; editing by Erica Billingham and Andre Grenon)

Total Agrees to Buy SunPower for $1.38 Billion in Renewable-Energy Push

By Andrew Herndon, Christopher Martin and Ehren Goossens - Apr 29, 2011 7:22 AM PT

Solar panels manufactured by SunPower Corp. draw energy from the sun on the roof of Agilent Technologies Inc.'s headquarters in Santa Clara, California, U.S. Photographer: Chip Chipman/Bloomberg

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April 29 (Bloomberg) -- Patrick de la Chevardiere, chief financial officer of Total SA, talks with Bloomberg's Tara Patel in Paris about the company's oil production targets. De la Chevardiere also discusses Total's agreement to buy as much as 60 percent of SunPower Corp. for $1.38 billion, outlook for asset sales and first-quarter profit reported today. Europe's third-largest oil producer said profit climbed 35 percent as higher crude prices offset a drop in production partly due to the conflict in Libya. (Source: Bloomberg)
Total SA (FP), Europe’s third-biggest oil producer, agreed to buy as much as 60 percent of SunPower Corp. (SPWRA) for $1.38 billion, taking advantage of increased global interest in renewable energy.
SunPower, the second-largest U.S. solar panel maker, described the acquisition price of $23.25 a share as a “friendly tender offer” in a statement yesterday after the close of regular trading. SunPower surged $6.08, or 38 percent, to $22.20 at 9:32 a.m. on the Nasdaq Stock Market.
The deal for San Jose, California-based SunPower may lead to more solar industry acquisitions 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.”
Sivest, also based in San Jose, held about 17,000 shares of SunPower at the start of the year. The stock has gained 72 percent this year.
The takeover may trigger similar acquisitions by oil companies that consider renewable-energy manufacturers a way to improve their clean-energy credentials and may profit when surging crude prices reduce demand for fossil fuels, John Hardy, an analyst at Gleacher & Co. in New York, said in a phone interview.

Cheaper Borrowing Costs

“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 become more profitable too because Total has cheaper borrowing costs, Hardy said.
Total will also provide SunPower with as much as $1 billion of credit support over the next five years.
“The fact that a global oil and gas giant like Total has made such a significant investment in a solar company is extremely encouraging for the entire solar industry,” said Shawn Qu, chief executive officer and founder of China-based Canadian Solar Inc. (CSIQ) “Total’s investment demonstrates that solar is really coming into its own as a viable energy market, and traditional energy conglomerates want to be part of that burgeoning growth.”
Shares of Total, which reported first-quarter earnings today that climbed 35 percent to 3.1 billion euros from a year earlier, rose 0.4 percent to 43.17 euros at 4:15 p.m. Paris time.

Solar Rally

Jesse Pichel, an analyst at Jefferies Group Inc. in New York, said in an interview that other solar companies may also be acquisition targets. “This group is undervalued and at least some people recognize the value.”
Solar firms increased after the announcement, which came six weeks after the nuclear-power accident in Japan.
China’s Suntech Power Holdings Co., the world’s largest solar panel manufacturer, rose 2.5 percent to $9.29 and MEMC Electronic Materials gained 6.4 percent to $11.84. Canadian Solar increased 4.7 percent and Tempe, Arizona-based First Solar Inc. (FSLR), the world’s largest thin-film solar panel maker, climbed 3.4 percent.
Total is buying a solar-power company that’s less profitable than most of its peers even after improving margins in the fourth quarter. The company’s operating margin over the last four quarters was 6.3 percent, below the 8.1 percent average and 14.1 percent market-capitalization weighted average of the 37-member Bloomberg Global Leaders Solar Index.

46% Premium

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.
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. Deutsche Bank AG is advising SunPower on the transaction and Credit Suisse Group AG and Messier Maris et Associes are advising Total.
To contact the reporters on this story: Andrew Herndon in San Francisco at aherndon2@bloomberg.net; Christopher Martin in New York at cmartin11@bloomberg.net; Ehren Goossens in New York at egoossens1@bloomberg.net
To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

Total to take majority stake in SunPower

Posted: Apr 28, 2011 3:09 PM PDT Updated: Apr 28, 2011 3:09 PM PDT

Business News

By The Associated Press
French oil company Total SA said on Thursday that it will offer $23.25 for up to 60 percent of the shares of solar panel maker SunPower Corp.
The move will put Europe's third-largest oil company into the growing solar business.
The offer values SunPower at $2.3 billion, and SunPower shares jumped on the news, rising $6.39, or nearly 40 percent, to $22.51 in aftermarket trading after the deal was announced. Total shares fell 15 cents to $63.65.
The companies said Total would also offer SunPower up to $1 billion in lending.
SunPower, based in San Jose, Calif., makes some of the world's most efficient solar panels, but at relatively high cost. It has struggled to compete with lower-cost panels made by Chinese companies and with thin-film solar panels made by First Solar.
SunPower CEO Tom Werner said the partnership with Total will help SunPower expand its manufacturing capacity at a lower cost.
Philippe Boisseau, president of Total's gas and power division, said the move is looking toward a "long-term transition in which renewable energies will take their place alongside conventional resources." The company aims "to become a major integrated player in solar energy."
Total looked at a number of solar investments for more than two years before picking SunPower, Boisseau said.
Total is based in Courbevoie, France.