The deal is set to be one of the largest ever single investments by an oil company in renewable energy, as Total plans to buy up to 60 percent of SunPowers A and B shares at a price of $23.25 each; a 46 percent premium to the A shares closing price on Wednesday, and an overall cost of $1.37 billion for the French company. This price values SunPower's equity at $2.3 billion.
The news has already seen other European Solar companies stocks rise in early trading as news of the offer spreads and confirms a resurgence of interest in solar investments following the nuclear crisis at Japan's Fukushima power plant caused by last month's earthquake.
Totals investment, which follows ExxonMobils investment in research to produce biofuels from algae, is also another example of a possible shift in focus from many large oil companies that are looking to invest in renewable energy sources.
The company has said that it will provide SunPower with up to a further $1 billion of credit support over the next five years, which Tom Werner, SunPowers chief executive, said was a key element of the deal.
Following closing of the transaction, which has been approved by the boards of both companies, SunPower will continue to operate with its current management team.
SunPower is the second-largest solar panel supplier in the U.S. and runs a vertically integrated business from manufacturing photovoltaic cells and panels to developing solar plants. By taking a majority stake, but maintaining SunPowers independence, Total is hoping to benefit from both its own global financial clout and reach, and leverage off SunPowers culture and entrepreneurial spirit.
"Totals commitment and global presence will help accelerate our growth and solidify our position in the increasingly competitive solar sector," stated Werner.
"The world future energy balance will be the result of a long-term transition in which renewable energies will take their place alongside conventional resources," added said Philippe Boisseau, President, Total Gas and Power Division.
"Today, Total is executing on its strategy to become a major integrated player in solar energy," he added. "We evaluated multiple solar investments for more than two years and concluded that SunPower is the right partner based on its people, world-leading technology and cost roadmap, vertical integration strategy and downstream footprint."
Christophe de Margerie, Totals chief executive, has been one of the most outspoken big oil CEOs in pushing investments in renewable energy. He has traditionally had a more pessimistic view than others in the industry about the future of non-renewable energy and has talked about wanting to position the company for a long-term future when oil runs short.
Transaction details
Under the terms of the tender offer agreement, SunPower shareholders will receive $23.25 per share in cash at closing for each share validly tendered in the tender offer, subject to pro-ration in the event that more than 60 percent of SunPower's Class A and Class B shares are tendered.
Total expects to begin its tender offer within ten business days. Following the completion of the transaction, SunPower's shares will continue to trade on Nasdaq under the symbols "SPWRA" and "SPWRB". The closing of the tender offer is conditioned on a minimum of 50 percent of the outstanding shares of each of the Class A and Class B common stock being tendered, clearance by U.S. and European Union antitrust authorities, and other customary closing conditions.
The added credit offered by Total is expected to allow SunPower to substantially reduce the cost of its letters of credit and financing as well as increasing its access to uncollateralized debt financing.
SunPower intends to call a meeting of its stockholders within six months following closing to combine its Class A and Class B common stock into a single class of common stock with one vote per share. This plan is subject to the company's receipt of a tax opinion that such reclassification will be permitted on a tax free basis, and Total has agreed to vote its shares in favor of the reclassification.
Total has also said that they expect the share prices to rise over the coming years.
What it means for solar
SunPower and Total have also entered into a research and collaboration agreement under which the companies will focus on advancing photovoltaic technologies across multiple research and development projects. The injection of capital will greatly improve the companys ability to meet its targets in Italy, which has been much talked about in recent weeks.
"Solar is becoming a material addition to the new generation portfolio around the world, with more than 40,000 megawatts of solar photovoltaic power installed globally," said Werner. "Total and SunPower will collaborate to ensure that solar becomes a platform for an efficient, competitive and sustainable energy future. Already, SunPower's high-efficiency, high-reliability solar photovoltaic power plant costs are competitive with other new resources."
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