French oil giant Total is buying up to 60% of US solar manufacturer and project developer SunPower for $1.38bn, and will extend the US PV manufacturer a $1bn credit facility.
The deal, which the companies position as a “broad strategic relationship”, would represent among the largest plays yet by an oil supermajor in solar and could be a boon to other PV companies. It follows closely on General Electric’s $600m bet on solar, announced earlier this month.
Philippe Boisseau, president of the Total Gas and Power Division, says the world is undergoing a “long-term transition in which renewable energies will take their place alongside conventional resources... Today, Total is executing on its strategy to become a major integrated player in solar energy.”
SunPower chief executive Tom Werner says the deal would help “accelerate our growth and solidify our position in the increasingly competitive solar sector”.
The company makes among the highest-efficiency solar panels, but is not a top-10 player in terms of market share.
SunPower has developed a major project development business and recently reported a near-term utility scale project pipeline of 1.5GW with another 3.5GW of projects for which it has site control.
Under terms of the credit support, Total will guarantee up to $1bn of SunPower’s obligations regarding letters of credit related to its utility power plant and large commercial installation business. Says Werner, “Our relationship with Total will improve our capital structure enabling SunPower to accelerate our power plant and commercial development businesses, and expand our manufacturing capacity with lower cash requirements”.
SunPower reported sales of $937.1m in its fiscal 2010 fourth quarter and net income of $152.3m. In February, the time of its most-recent quarterly report, the California company was expecting 2011 revenue of $2.8bn-2.95bn, up as much as 32% from 2010, on shipments of 825MW-920MW.
Boisseau says Total spent two years evaluating multiple solar investments before going forward with SunPower.
The transaction, described as a friendly tender offer, involves a Total subsidiary purchasing up to 60% of SunPower’s Class A and B stock for $23.25 a share, a premium of more than 46% on the Wednesday closing price of the A shares. It values SunPower at $2.3bn.
The companies plan to collaborate on solar research and development. And SunPower expects to benefit from Total's global footprint and balance sheet.
The boards of both companies have approved the transaction and the tender offer is to begin within 10 business days. A minimum of 50% of the outstanding shares of SunPower must be tendered for the transaction to go ahead. Total may purchase more SunPower shares in the future. The deal must also pass muster with US and European regulators.
SunPower’s existing management team is expected to remain intact after the transition. Total will nominate the majority of SunPower directors.
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