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TOTAL to Diversify Business with Saft Group Buy for $1.1B

Zacks Equity Research
Updated

Global integrated oil and gas company TOTAL S.A. TOT announced that it will acquire Saft Group following an agreement signed between the two companies. Saft Group is a leading designer and manufacturer of advanced technology batteries.

The tender offer made by TOTAL will target all of Saft’s issued and outstanding shares at a price of $41.90 (€36.50) per share, valuing Saft’s equity at $1.1 billion (€950 million). The price offered reflects a premium of 38.3% on Saft’s closing share price on May 6 and a premium of 41.9% above the volume weighted average share price over the past six months.

The financial strength of TOTAL allows it to take the inorganic route to expand its operations. This acquisition will offer another avenue for revenue generation for this oil and gas major. In 2011, the company joined the alternate energy bandwagon by acquiring SunPower Corp. SPWR. This acquisition will allow TOTAL to complement its portfolio with the addition of electricity storage solutions. Proper storage of energy is a key factor that will drive growth in the renewable energy space in the future.

We believe TOTAL’s decision to expand in the alternate energy business is a smart move given the current global view on renewable energy. Curbing emission and adding more renewable generation to the electricity production mix seem to be the new goal for developing countries. TOTAL with its global oil and gas operations will be able to provide its renewable solutions at a faster pace in these countries.

Apart from diversifying its operations through the inorganic route, TOTAL continues to realign its existing oil and natural gas portfolio through acquisitions and divestures. During first-quarter 2016, TOTAL acquired assets worth $193 million, primarily comprising the acquisition of a service station network in the Dominican Republic. On the other hand, the company divested assets worth $885 million, including the sale of the FUKA gas pipeline network in the North Sea.

TOTAL currently has a Zacks Rank #3 (Hold). Some better-ranked stock in the same space are PetroChina Co. Ltd. PTR and Braskem S.A. BAK, both sporting a Zacks Rank #1 (Strong Buy).

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
PETROCHINA ADR (PTR): Free Stock Analysis Report
 
TOTAL FINA SA (TOT): Free Stock Analysis Report
 
BRASKEM SA (BAK): Free Stock Analysis Report
 
SUNPOWER CORP-A (SPWR): Free Stock Analysis Report
 
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Zacks Investment Research