US residential solar installer Sunrun Inc (NASDAQ:RUN) has agreed to buy rival Vivint Solar (NYSE:VSLR) in an all-stock deal with an enterprise value of USD 3.2 billion (EUR 2.83bn).
The move represents a step that will allow Sunrun to solidify its market position, the buyer said on Monday. The solar installer has signed a definitive agreement entitling Vivint Solar’s shareholders to get 0.55 of Sunrun common stock for each share held, representing a premium of 10% to the closing price of the target’s stock on July 6. As a result, the stockholders of Blackstone-backed Vivint Solar will own around 36% of the enlarged company, while the remaining 64% will be held by the shareholders of Sunrun.
The combined enterprise value of the deal stands at USD 9.2 billion based on Sunrun’s closing price on July 6. The transaction will create a company with more than 3 GW of solar assets on the balance sheet and almost 500,000 customers, Sunrun said. The annual cost synergies that will result from the transaction are estimated at USD 90 million on an annual basis.
Ravi Manghani, research director at Wood Mackenzie, said the combined entity could hold a share of over 15% of the US residential solar market.
“Per Wood Mackenzie’s US PV Leaderboard, Sunrun and Vivint have been the #1 and #2 residential solar companies in the US for the past few years. Sunrun holds about 9% of the market share and Vivint is right behind at 7-8%,” Manghani said.
The definitive acquisition agreement was unanimously approved by the two companies’ boards and the acquisition is seen to be completed in the last quarter of this year. It is pending shareholder clearance by both companies, as well as the required regulatory approvals. Support agreements from the largest stockholders of both sides are already in place.
Once the transaction closes, two more directors will join Sunrun’s board of directors. One of them is expected to be Vivint Solar’s CEO David Bywater. Commenting on the deal, he said: “Joining forces with Sunrun will allow us to reach a broader set of customers and accelerate the pace of clean energy adoption and grid modernization.”
Sunrun’s CEO Lynn Jurich, meanwhile, added that the planned transaction will expand the scale of the company’s business and grow its energy services network.
Credit Suisse Securities USA LLC provided financial counsel to Sunrun, while Morgan Stanley Co LLC and BofA Securities advised Vivint Solar.
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Image by Twitter, @VivintSolar
