Sunrun to acquire Vivint Solar for an enterprise value of $3.2 billion doubling its residential solar market share in the U.S.

Sunrun, a leading provider of residential solar, battery storage and energy services in the Unites States announced it has entered into into a definitive agreement with Vivint Solar, a full-service residential solar provider headquartered in Utah,  under which Sunrun will acquire Vivint Solar in an all-stock transaction.

Vivint Solar stockholders are expected to own approximately 36% and Sunrun stockholders are expected to own approximately 64% of the fully diluted shares of the combined company. The exchange ratio implies a 10% premium for Vivint Solar shares based on closing prices on July 6, 2020, and a 15% premium to the exchange ratio implied by the three month volume weighted average price of Vivint Solar and Sunrun shares.

The acquisition of Vivint Solar adds a complementary direct-to-home sales channel to Sunrun’s platform, increasing its reach and capabilities in a growing market. This transition has resulted in improvements for both companies, including setting the foundation for structural cost reductions and improved customer experience.

Under the terms of the definitive transaction agreement, each share of Vivint Solar common stock issued and outstanding immediately prior to the effective time of the merger will be converted automatically into the right to receive 0.55 shares of Sunrun common stock, representing a combined Enterprise Value of $9.2 billion based on the closing price of Sunrun’s shares on July 6, 2020.

The acquisition of Vivint Solar is expected to be completed during the fourth quarter of 2020, subject to approval by Vivint Solar and Sunrun stockholders, regulatory approvals and other customary closing conditions.

Support Agreements have been obtained from both companies’ largest stockholders, 313 Acquisition LLC (Blackstone affiliate) and Tiger Global, to vote their respective shares in favor of the merger and the share issuance, respectively.

In addition, 313 Acquisition LLC (Blackstone affiliate) has agreed to lock up 50% of shares obtained as a result of the acquisition for 60 days following closing and the remaining 50% for 120 days. Sales are allowed to occur during these periods subject to certain conditions.

Credit Suisse Securities (USA) LLC is serving as the exclusive financial advisor to Sunrun and Cooley LLP and Axinn, Veltrop & Harkrider LLP are serving as legal counsel. Morgan Stanley & Co. LLC is serving as the lead financial advisor to Vivint Solar, BofA Securities, Inc. is serving as a financial advisor to Vivint Solar and Simpson Thacher & Bartlett LLP and Wilson Sonsini Goodrich & Rosati are serving as legal counsel.

Lynn Jurich, Sunrun’s Chief Executive Officer and co-founder said:

“Americans want clean and resilient energy. Vivint Solar adds an important and high-quality sales channel that enables our combined company to reach more households and raise awareness about the benefits of home solar and batteries. This transaction will increase our scale and grow our energy services network to help replace centralized, polluting power plants and accelerate the transition to a 100% clean energy future. We admire Vivint Solar and its employees, and look forward to working together as we integrate the two companies.”

David Bywater, Chief Executive Officer of Vivint Solar, added:

“Vivint Solar and Sunrun have long shared a common goal of bringing clean, affordable, resilient energy to homeowners. 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. We believe this transaction will create value for our customers, our shareholders, and our partners.”

Commenting on the deal, Ravi Manghani, Wood Mackenzie Research Director, said:

“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%. Without assuming any erosion or gains in market share, the combined entity will represent about 15+% of overall market share.

Austin Perea, Wood Mackenzie Senior Research Analyst, added:

“Sunrun’s acquisition of Vivint Solar will nearly double its market share and represents the largest consolidation in residential solar history. In the near-term, Sunrun will realize millions of dollars in vital cost synergies that accompany scale. These efficiencies will become increasingly important in a cost-competitive industry.

Source: Press Release by Sunrun and Wood Mackenzie. Photo credit: Nate Castner via Shotzr.