UPDATE 2-Total's SunPower bid adds shine to solar M&A

Fri Apr 29, 2011 2:41pm EDT

Related Topics

* SunPower shares up 34 percent on the Nasdaq

* Deal fuels sector M&A speculation, solar shares gain

* Regulatory uncertainty plagues sector (Adds link to Breakingviews column)

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 Corp SPWRA.O 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.

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ANALYSIS on impact of nuclear crisis on renewables:

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Breakingviews-Total pays luminous price for SunPower control [ID:nN29296109]

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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. [ID:nN28286200]

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 (PS4G.DE), Q-Cells SE QCEG.DE, SolarWorld AG SWVG.DE, SMA Solar Technology AG (S92G.DE) and Norway's Renewable Energy Corp (REC.OL) 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 WFR.N, Chinese players JA Solar Holdings Co Ltd (JASO.O), Hanwha Solarone Co Ltd (HSOL.O), LDK Solar Co Ltd LDK.N and Canadian Solar Inc (CSIQ.O) and U.S. solar equipment maker GT Solar International Inc SOLR.O. 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. [ID:nLDE73R0WV]

"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 MBTN.S launched a takeover bid for German peer Roth & Rau AG R8RG.DE, 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. [ID:nN27136409] [ID:nN26293732] [ID:nWEA1268]

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)

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