* Total to launch tender for 60 pct of SunPower shares
* Deal worth up to $1.37 billion
* Total to provide SunPower with $1 bln of credit support
(Adds CEO comments, background on deal, analyst comment on
By Nichola Groom
LOS ANGELES, April 28 French energy company
Total SA (TOTF.PA) offered to pay up to $1.37 billion for a
majority stake in U.S. solar company SunPower Corp SPWRA.O,
one of the biggest moves ever by an oil and gas giant into the
market for renewable energy.
Solar power has been one of the fastest growing energy
industries in recent years, but still remains tiny compared
with oil, gas and coal because of its higher cost. With Total's
financial heft behind it, SunPower said solar energy would
become competitive with fossil fuels more quickly.
"It's a vote of confidence from a much larger company and a
vote of confidence for the solar industry as a whole," Wedbush
analyst Christine Hersey said.
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.
According to SunPower Chief Executive Officer Tom Werner,
Total preferred to keep its stake at 60 percent rather than buy
the company outright because it wanted to maintain the Silicon
Valley company's "entrepreneurial pace."
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, the
global financial crisis that squeezed financing for solar
energy projects, 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.
It was Total that first approached SunPower regarding a
deal, Werner said on a conference call with analysts. The oil
giant looked at 200 solar companies over 2 years, Werner said.
At the same time, SunPower spent the last year weighing options
for how it could finance its aggressive expansion plans.
"Total came out as the clear winner," Werner said.
The rapid emergence of Chinese solar panel makers in the
recent years has driven the price of solar power down sharply
and stepped up competition in the market. Chinese players have
also benefited from billions of dollars in credit guarantees
from government banks at a time when traditional financing
sources became more difficult to access for their U.S. and
Werner said the Total deal would make SunPower more
competitive against that industry backdrop because it 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.
"Our capacity to build projects has increased immediately,"
The move surprised analysts, since profit margins for the
solar industry are contracting because of weakened sales in No.
2 solar market Italy, where government support for solar is
pulling back, a worldwide expansion of manufacturing capacity
and rising raw material costs.
"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 panel
makers as its products have the highest efficiencies in the
industry, although Chinese rivals Suntech Power Holdings
STP.N and JA Solar Holdings (JASO.O) are both targeting that
premium panel market. (r.reuters.com/bat29r)
SunPower's shares rose 40 percent in after-hours trading to
$22.50 per share, and shares of peers First Solar (FSLR.O), LDK
Solar LDK.N and MEMC Electronic Materials WFR.N also rose.
"I can imagine the whole sector will be trading up in the
near term as people speculate on who's next," Hersey said. "I'm
a little skeptical that there will be a series of these deals.
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.
Deutsche Bank AG (DBKGn.DE) advised SunPower on the deal,
while Credit Suisse CSGN.VX and Messier Maris et Associes
advised Total, according to sources familiar with the matter.
Total, which is based in Paris, said it has been active in
solar power through investments in small companies, but none
have matched the global success of SunPower.
BP Plc (BP.L) has long been a major player in the solar
industry although the British company pulled back in 2009 when
the industry suffered a downturn during the global credit
crisis. Royal Dutch Shell (RDSa.L) halted its solar investments
(Additional reporting by Matt Daily and Mike Erman in New York
and Edwin Chan and Lisa Baertlein in Los Angeles; Editing by
Marguerita Choy, Andre Grenon and Carol Bishopric)