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

Fri Apr 29, 2011 6:17am EDT

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By Christoph Steitz

FRANKFURT, April 29 (Reuters) - French energy major Total SA's (TOTF.PA) landmark $1.37 billion offer for a majority stake in U.S. company SunPower SPWRA.O gave fresh impetus to hopes of more deals, lifting European solar firms' shares.

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.

Investors have been waiting for several 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.

Big utilities have so far shunned the sector, which predominantly features small roof-installed systems rather than 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.

"It (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.

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Total late on Thursday said it would launch a tender offer for up to 60 percent of SunPower's SPWRA.O outstanding Class A common shares and 60 percent of its Class B common shares for $23.25 a share. [ID:nN28286200]

This represents a more than 44 percent premium to SunPower's Class A closing share price of $16.12 on Thursday's. At 1011 GMT, Frankfurt-floor traded shares in SunPower SPWRa.F were up 40 percent.

"This step should fuel takeover speculation in the sector again and should drive share prices today," DZ Bank analyst Sven Kuerten said. Shares in European solar companies were higher, with Phoenix Solar (PS4G.DE), Q-Cells QCEG.DE, SolarWorld SWVG.DE, SMA Solar (S92G.DE) and Norway's Renewable Energy Corp (REC.OL) up 4-9.4 percent.

The Total deal comes less than three weeks after Swiss solar equipment maker Meyer Burger MBTN.S launched a takeover bid for German peer Roth & Rau R8RG.DE, valuing the company at 356 million euros ($528 million).

However, the deal also triggered some scepticism, as the sector is grappling with falling subsidies in Italy, the industry's second-biggest market after Germany, which is expected to approve a new scheme on Friday that will cut support. [ID:nLDE73R0WV]

"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 China's LDK Solar LDK.N earlier this week cut its first-quarter revenue forecast. [ID:nN27136409] [ID:nN26293732] [ID:nWEA1268]

(Editing by Erica Billingham)

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