SunPower to Acquire Tenesol

SunPower Corporation (SPWR - Analyst Report) announced that it has signed a definitive agreement to acquire Tenesol SA, a wholly owned subsidiary of oil giant TOTAL S.A. (TOT - Analyst Report), for $165.4 million in cash. SunPower expects the acquisition to have a positive impact to its financial results in 2012.

Concurrent with closing of the acquisition, Total has agreed to buy 18.6 million SunPower common shares in a private placement at $8.80 per share, a 50% premium to the December 22, 2011, closing price. After the deal, Total will own about 66% of SunPower's common shares. Earlier, in June 2011, TOTALacquired 60.0% of SunPower.

Tenesol, a global solar panel provider based in La Tour de Salvagny, France, has operations in 18 countries with manufacturing facilities in France and South Africa. It had generated revenues of 240 million euros in 2010, and currently expects revenues of 200 million euros in 2011.

SunPower’s customer base is spread across North America, Europe, the Middle East, Asia and Australia. The company is also increasing its global market presence within the residential and commercial markets by expanding its network of approximately 1,600 dealers. Additionally, the company is gradually shifting its revenue base from solar panel sales to developments of solar projects, power plants and engineering, procurement and construction (EPC) systems.

SunPower digested a loss in the recently reported third quarter. However, it still managed to be in line with the Zacks Consensus Estimate owing to cost reduction efforts. Going forward, we are bullish on the company due to its diversified channel strategy with a strong presence in the residential and commercial market, along with its status as a conversion efficiency leader. The company also has a steadfast focus on spreading its revenue stream by climbing the solar value chain. Over the near term, however, we are apprehensive about the higher cost structure of the company vis-à-vis its peers, an oversupply glut of solar panels in the market, lower Average Selling Prices, subsidy roll-back risk in Europe, and foreign exchange risk.

SunPower presently retains a short-term Zacks #4 Rank (Sell). Over the longer run we maintain our long-term Neutral recommendation on the stock.

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