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Big Oil Takes a Plunge Into Solar

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Mark your calendars: April 28, 2011 was the day Big Oil took notice of solar power and couldn't stand on the sidelines any longer.

Total (NYSE: TOT  ) , one of the biggest oil companies in Europe, made a massive tender offer for 60% of American solar manufacturer SunPower (Nasdaq: SPWRA  ) . The offer is for $23.25 per share, a 46% premium to yesterday's closing price. The deal also includes a $1 billion line of credit over the next five years to SunPower.

This is a big deal because after years of complaints that the solar industry isn't economically viable, oil giants may finally be coming around to solar's potential. Until now, investments have been halfhearted PR stunts by companies like BP Solar or total disinterest (in the case of ExxonMobil). But this is different.

Total isn't making a halfhearted attempt at building a solar company. It isn't a tiny investment in an alternative energy startup; this is a multi-billion dollar investment in an independent, successful solar manufacturer. I'm even wondering if Total attempted to buy the whole company and SunPower said, "I don't think so."

Investors across the solar industry are taking notice with First Solar (Nasdaq: FSLR  ) , LDK Solar (NYSE: LDK  ) , and Canadian Solar (Nasdaq: CSIQ  ) all jumping higher today. Could this put pressure on other companies to make a move?

Mergers that might make sense
If other oil firms decide it's the right time to move into solar, I don't see it being with Chinese manufacturers who benefit from subsidies in China. It would make more sense to acquire a firm that is currently private, like Solyndra or BrightSource Energy.  It could also make sense to see a manufacturing company acquiring equipment manufacturer GT Solar (Nasdaq: SOLR  ) to take advantage of solar's massive growth in capacity.

Even a deal to give Evergreen Solar (Nasdaq: ESLR  ) the capital they need to survive might be a reasonable value with the right backer. But the company hasn't proven to be profitable like competitors, so even that's a stretch.

Bottom line: I don't think this will start a rash of acquisitions by big oil in the solar sector. But no matter how I look at this deal, I see it as a big boost for solar manufacturers in general.

What do you think about the future of solar deals?

Fool contributor Travis Hoium owns shares of First Solar and SunPower. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

First Solar is a Motley Fool Rule Breakers choice. Total A. is a Motley Fool Income Investor selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (3) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 30, 2011, at 4:51 AM, Clint35 wrote:

    Royal Wedding? Was that today? Well, technically it was yesterday because it's almost 4 in the morning on Sat. I sure hope this is just the beginning for deals like this one. It's way past time big oil companies started looking into other forms of energy. Not only because they're cleaner but also because oil will eventually be gone. I think this is a smart move.

  • Report this Comment On April 30, 2011, at 3:44 PM, goalie37 wrote:

    As a TOT shareholder, I am very happy about this deal.

  • Report this Comment On May 02, 2011, at 2:26 PM, RickRickert4MVP wrote:

    As a SPWRA shareholder, I am very happy about this deal.

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