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Total to Take Majority Stake in SunPower

(SunPower, Total deal story updated for SunPower comments from analyst call)

NEW YORK ( TheStreet) -- European oil giant Total (TOT - Get Report) announced after the close on Thursday that it is offering to take a 60% majority stake in U.S. solar company SunPower (SPWRA), paying up to $1.3 billion.

SunPower shares soared by 40% after the close, from a closing share price of $16.21 to $22.60.

SunPower officials described the deal as a transformational investment that will help fund projects across the board from it largest utility scale deals to smaller commercial and residential projects as it seeks to install as much as 10 gigawatts of solar over the next half decade. SunPower pointed to Total's credit strength and financing relationships across a global footprint of 130 countries.

In a negative footnote to the news, SunPower forecast first-quarter earnings of 15 cents a share, the low-end of its previous guidance and below Wall Street's consensus view of 19 cents. SunPower sees revenue of $450 million in the first quarter, shy of the average analysts' view of $510 million.

The company cited delayed projects in Europe as regulatory uncertainty in Italy has slowed project development, a factor that has been well-telegraphed by solar investors and analysts.

Total will commence a tender offer for up to 60% of SunPower's class A and class B shares at a price of $23.25/share, a 46% percent premium over the April 27 closing price of SunPower's A shares and a 49% premium over the B shares closing price.

In addition, Total will provide SunPower with up to $1 billion of credit support over the next five years.

SunPower has had one of the more stressed balance sheets in solar, and last year signed a deal with Taiwan's AU Optronics to help move off its balance sheet funding for a 1.4 gigawatt solar cell fabrication facility in Malaysia.

"Total's commitment and global presence will help accelerate our growth and solidify our position in the increasingly competitive solar sector," said Tom Werner, SunPower's CEO in the press release announcing the acquisition. "With Total's $1 billion credit support agreement, solar research and development investments and the other resources available through its global network, we have taken the next step in positioning our business for continued growth and long-term success. 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."

The huge premium offered by Total for SunPower shares comes after a one-year period during which SunPower shares have been close to flat in trading. SunPower went public in 2005 and in its first day of trading rose from its IPO price of $18 to above $25, compared to the $23.25 offered by Total for a 60% stake. SunPower shares rose as high as $130 in 2007, and were still trading at the $40 mark at the outset of 2009 before declining to the current range, which over the past year saw SunPower shares move as low as $10 and as high as $20.

Shares of the largest solar companies, including the U.S. companies First Solar (FSLR - Get Report) and MEMC Electronic Materials (WFR), which both have big project businesses like SunPower, rose by 7% after the close. The Chinese solar leaders Yingli Green Energy (YGE), Trina Solar (TSL), and Suntech Power (STP), also shot up quickly after the closing bell by between 5% and 7%.

SunPower has acquired a large pipeline of financing-intensive, lower margin large-scale solar projects in North America and Europe, but SunPower officials stressed on a conference call on Thursday afternoon that the Total deal is transformational for the whole company, not just its large-scale solar business.

SunPower CEO Werner said, "We see it as a 2012 and beyond acceleration and see it being three fold: capacity, cost and new markets."
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