LOS ANGELES French energy company Total SA offered to pay up to $1.37 billion for a majority stake in U.S. solar company SunPower Corp, a bid by the oil and gas giant to become a major player in solar power.
Solar power has been one of the fastest growing energy industries in recent years, but still remains tiny compared with oil, gas and coal.
Total will 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.
The price represents a more than 44 percent premium to SunPower's Class A closing share price of $16.12 on Thursday. In the last few years SunPower's shares have been battered by concerns about stepped-up competition from Chinese rivals and uncertainty surrounding support schemes for renewable energy by governments in Europe.
The stock has tumbled dramatically since hitting an all-time high of $164.49 in late 2007.
The move surprised some analysts, since profit margins for the solar industry are expected to suffer in the second half of the year with sales in key European markets likely to weaken as subsidies there decline, even as solar companies ramp up manufacturing capacity.
"In my opinion, this seems like a poorly timed offer. Solar is about to enter a period of intense price competition," said Morningstar analyst Stephen Simko.
SunPower has been among the most successful solar makers and its panels have the highest efficiencies in the industry, although Chinese rivals Suntech Power Holdings and JA Solar Holdings are both targeting that premium panel market. (r.reuters.com/bat29r)
"It seems like a pretty high price given the current market conditions," said Christine Hersey, analyst at Wedbush Securities. "It's a vote of confidence from a much larger company and a vote of confidence for the solar industry as a whole."
SunPower's shares rose 40 percent in after-hours trading to $22.50 per share, and shares of peers First Solar, LDK Solar and MEMC Electronic Materials also rose.
As part of the deal, Total will provide San Jose, California-based SunPower with up to $1 billion of credit support over the next five years -- cash that will enable SunPower to speed development of solar power plants and expand manufacturing capacity.
"Total's commitment and global presence will help accelerate our growth and solidify our position in the increasingly competitive solar sector," SunPower Chief Executive Tom Werner said in a statement.
The deal has been approved by the boards of directors of both companies. SunPower will continue to operate with its current management team. The deal is contingent on a minimum of 50 percent of the outstanding shares in each class of shares being tendered, and on regulatory clearance.
Total, which is based in Paris, said it has been active in solar power since 1983, and has joint ventures with French companies Tenesol and Photovoltech, as well as a minority stake in U.S. company Konarka, although none of those companies have matched the global success of SunPower.
BP Plc has long been a major player in the solar industry through its BP Solar unit, although the British company cut more than 600 jobs and shut two manufacturing plants in 2009 when the industry suffered a downturn during the global credit crisis.
Royal Dutch Shell halted its solar investments in 2009, when it said it would focus instead on developing biofuels.