In the largest rooftop solar acquisition to date, Sunrun has entered into an agreement to acquire Vivint Solar in an all-stock transaction for $3.2 billion. Vivint Solar serves as a full-service residential solar services provider in the United States, while Sunrun is a home solar, battery storage, and energy services company.
As per the agreement, each share of Vivint Solar will be exchanged for 0.55 shares of Sunrun common stock accounting for a total enterprise value of $9.2 billion. Vivint stockholders will own 36% of the fully diluted shares of the combined company, and Sunrun will own nearly 64% of the shares. The exchange ratio implies a 10% premium for Vivint Solar based on the closing price on Monday.
The combined customer base of the two companies is nearly 500,000, and both the companies together have nearly 3 GW solar assets globally. Residential solar is making its way in the United States, and with only 3% penetration, the scope for growth remains massive.
The acquisition of Vivint Solar is expected to be completed during Q4 2020, subject to the approval of the stockholders of both the companies. The acquisition adds a complementary direct-to-home sales channel to Sunrun’s platform, increasing the reach of the company in a growing market.
As a result of the acquisition, Sunrun’s increased scale and research and development (R&D) expertise would help in faster adoption of renewable energy among households in the country. It is also likely to give customers access to better and affordable products and services.
Sunrun expects that the acquisition will help it to make use of the opportunities across the entire cost base, including consolidation of the branch footprint and reducing redundant spending on technology systems and scaling the proprietary racking technology. The company is also planning to offer battery assets to solar customers.
According to our Mercom Capital Group’s 1H and Q2 2020 Solar Funding and M&A Report, there were 25 solar M&A (mergers and acquisitions) transactions in 1H 2020, compared to 37 transactions in 1H 2019. According to Mercom’s research, in June 2020, Vivint Solar closed two separate deals totaling $545 million in incremental lender commitments.
Previously, Mercom reported Vivint Solar had announced the closing of $811 million of debt financing. The amount was raised in two separate transactions. The first transaction of $466 million was achieved through capital markets issuance by its wholly-owned subsidiary, Vivint Solar Financing. Credit Suisse Securities (USA) LLC and Citigroup Global Markets, Inc. were the joint bookrunners and co-structuring agents in this agreement. The second transaction of $345 million was a private issuance by Vivint Solar Financing IV, LLC. Credit Suisse acted as the arranger of the private placement.
Update: This article has been updated with a chart reflecting the largest solar downstream M&A transactions since 2010