This was no surprise. Total was paying a 50% premium on the $15.26 per share Sunpower was worth in April, after the smaller company adjusted its earnings guidance down. Analysts questioned the deal then, and question it now. SunPower is also getting $1 billion in credit back-up, making for a total investment of almost $2.4 billion, and with 40% of the company still outside Total's hands.
If you follow Total, this is not terribly relevant to your investment decision. The company has a market cap of over $125 billion. It is still considered a safe dividend play.
So what's the deal? Is all this just PR? No. It's the first trickle in what could become a gusher of such deals as energy giants wrap their arms around the fact that, by the end of this decade, renewable energy will be the cheap energy, and that its price will continue to go down after that.
It's true SunPower needed this deal more than Total. The company has significant market share in the California panel market, but Chinese rivals are catching up. Some of that $1 billion will go to making certain SunPower can finance the sales it makes on equal terms.
The solar industry also needed this deal more than Total did. The $2.4 billion invested exceeds the value of all solar venture capital investments for 2010, according to the Cleantech Group.
So what's in it for Total?
SunPower sells systems, not just panels, including tracking gear that maximizes the yield of a utility installation.
SunPower's new E20 panels claim record-breaking efficiency, converting up to 20% of incoming solar energy to electricity, based on Department of Energy tests.
SunPower's Maxeon technology, which puts connectors behind the panel, lets it put 50% more power onto the same footprint of rival products.
SunPower has a solid and cocky management team headed by CEO Tom Werner, who claimed after the deal he could double his company's market share in 18 months.
The bottom line, however, is the bottom line. Werner must deliver on these promises, and investors can still bet on that directly, meaning success or failure will be completely transparent, not just to the public but to the rest of the oilpatch.
And that's the key point. The solar industry is still small enough oil companies can snap up for pocket change. If SunPower can make Goldman Sachs (GS) eat its order to "sell" and prove Total spent its $2.4 billion wisely, it will open eyes in Houston and send a gusher of money rushing into the space.
That would change the energy game as nothing else has, not just financially but politically. We've all got a lot riding on Werner.