Total’s SunPower bid adds shine to solar M&A

Main Image
Main Image

A storage tank is seen at the French oil and energy company Total’s refinery
at Donges near Nantes, western France, in this file picture taken February 22,
2010.

Credit: Reuters/Stephane Mahe/Files

//

By Christoph
Steitz

FRANKFURT | Fri Apr 29,
2011 7:42pm BST

FRANKFURT (Reuters) – French energy major
Total SA’s landmark $1.37 billion offer for a majority stake in U.S. company
SunPower Corp 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.

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.

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,
Q-Cells SE, SolarWorld AG, SMA Solar Technology AG and Norway’s Renewable Energy
Corp 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, Chinese players JA Solar Holdings Co Ltd,
Hanwha Solarone Co Ltd, LDK Solar Co Ltd and Canadian Solar Inc and U.S. solar
equipment maker GT Solar International Inc. 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.

“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 launched a takeover bid for German peer Roth &
Rau AG, 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.

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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