French energy giant Total S.A. (NYSE: TOT) last week announced it is offering $1.37 billion for a majority stake in U.S.-based SunPower (Nasdaq: SPWRA) (Nasdaq: SPWRB) in an effort to expand its area of business and tap the solar power generation market.

Total has offered to acquire 60% of outstanding shares of SunPower, and the company will pay $23.25 for each class A and B share, which is a 46% and 49% premium, respectively, for each class over prices on April 27, 2011. The value of equity stands at $2.3 billion.

For Foolish investors, the magic question is: Does the deal make any sense? Let's take a look.

Is the deal worthy?
Demand for energy is multiplying. As economic recovery gets back on track, there's an increasing need for economies to tap cheaper energy sources. Given this background, Total's move to acquire SunPower comes at a pretty opportune time.

According to the U.S. Energy Information Administration, the global use of liquids and other petroleum is expected to reach 92.1 million barrels per day in 2020. Now the question is: Will we be able to meet this demand?

Supply-side economics
Anyone living on planet Earth knows that the supply of petroleum-based resources is quite volatile and uncertain especially as we gaze out over the next century. One concern is whether the industry will be able to meet this growing demand in the future. Solar energy can partially offset this demand, and this is where Total is seeing an opportunity. Total's acquisition will help it to service both the liquid-based fuels market and the solar energy generation business.

Despite large leaps forward in recent years, the solar industry is in its nascent stage and thus depends on subsidies from the government to grow. However, Total's investment in solar power at this point in time should guarantee that it earns a better return later when the industry starts to gather steam.

Already today, Germany and Italy are major markets for solar power. SunPower has been generating a significant amount of its revenue from Italy. This is, in fact, a good opportunity for both to tap these markets. But it's just a start.

Exploring the synergies from this deal
The company is not a newcomer to the industry. In fact, Total has been an active player in the solar energy segment since 1983. With this new deal, the company is looking to diversify its business operations from traditional energy resources to renewable and clean energy resources. Acquisition of SunPower will fulfill its renewable energy dreams. With this, Total will be able to cater to the ever-expanding demand for energy resources in the future. How significant is it for SunPower? Let's check.

The numbers
Total will provide $1 billion of credit support to SunPower over the next five years. This will help SunPower reduce its cost of capital and give it enough room to access uncollateralized debt. Moreover, SunPower and Total will be able to explore various research and development opportunities in "advancing photovoltaic technology." SunPower is well-known in its industry for manufacturing efficient and reliable solar products and to better explore the opportunities in this sector. The agreement between the two parties is expected to spur growth in the solar power sector and provide financial strength to the entity. The deal will help SunPower to expand its presence globally as well.

SunPower faces very significant competition from Suntech Power Holdings (NYSE: STP), JA Solar Holdings (Nasdaq: JASO), and LDK Solar (NYSE: LDK) in the manufacturing of solar cells. However, its alliance with Total will help keep itself strong in the growing competitive landscape, and it now has the backing of a global energy power, which is a significant advantage to have.

Foolish bottom line
Total is making constant efforts to enhance its renewable energy activities. SunPower's leading technology and cost efficient business model will turn out to be profitable for both in the future. Total's early entry into this sector will yield good returns in the future. As the demand for solar energy picks up, both Total and SunPower will be able to reap benefits from of their investments.

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