The move was intended to boost value in SunPower shares, which are trading at the same level they were at two years ago. Monday's news was welcomed by investors, with shares up nearly 3.7% at $8.68 in afternoon trade.
The new solar panel company, named Maxeon Solar Technologies, will be headquartered in Singapore, with manufacturing operations in France, Malaysia, Mexico and the Philippines.
The remaining company will still be based in California and will retain the SunPower name. It will focus on catering to the growing residential and commercial rooftop solar installation markets in the United States through the company's network of hundreds of dealers. That company will also keep SunPower's new solar panel factory in Oregon.
"This transaction will also simplify both organizational structures, lowering costs, while improving efficiency and creating (two) more nimble companies," Chief Executive Officer Thomas Werner said on a conference call with analysts.
Werner will retain the CEO role at the company, while Jeff Waters, CEO of SunPower's Technologies business unit will head of Maxeon.
The separation will be through a tax-free spin‐off of all Maxeon Solar shares held by SunPower to the company's shareholders.
SunPower is majority owned by France's Total.
As part of the deal, SunPower's long-time partner Tianjin Zhonghuan Semiconductor Co will invest $298 million in Maxeon Solar and hold a 29% stake in the company, while SunPower shareholders will hold the rest.
At the time of separation, expected to be completed in the second quarter of 2020, the two businesses will enter into a multi-year exclusive supply agreement covering sales within the United States and Canada of products manufactured by Maxeon Solar.
Raymond James analyst Pavel Molchanov said the brokerage had a mixed perspective to the news.
"We have long looked at SunPower's vertical integration and broad geographic diversification as differentiating strengths rather than weaknesses: put another way, 'a feature, not a bug.'"
(Reporting by Arundhati Sarkar and additional reporting by Shradha Singh in Bengaluru; Editing by Marguerita Choy and Anil D'Silva)
By Arundhati Sarkar