Takeover will make Sunrun ‘freaking big’
Sunrun Inc., America’s biggest rooftop-solar company, is set to become a behemoth through a us$1.46 billion takeover of its rival Vivint Solar Inc. Shares of both companies surged.
The agreement announced late Monday is one of the industry’s biggest. It comes after Tesla Inc.’s 2016 purchase of debt-plagued Solarcity Corp. and the failed 2015 acquisition of Vivint by Sunedison Inc., the clean-energy giant that went bankrupt soon after.
The second major u.s. energy deal in as many days — following Berkshire Hathaway Inc.’s us$4 billion purchase of dominion energy Inc. assets — also threatens to further weaken Tesla’s grip on the rooftop-solar market and could inspire more sector consolidation. Sunrun and Vivint combined provide about 75 per cent of new residential solar leases each quarter, according to Bloombergnef.
“Sunrun will be freaking big,” Joe Osha, an analyst at JMP Securities, said in an interview. “They are clearly looking for ways to get scale and efficiency.”
Sunrun shares were up 26 per cent in late-morning trading in New york. Vivint climbed 39 per cent.
The deal, subject to approvals, values Blackstone Group Inc.-backed Vivint at us$3.2 billion including debt. It comes as America’s rooftop-solar industry works its way back from the worst of the coronavirus pandemic. door-to-door sales — a key marketing strategy for installers — practically ceased as states imposed lockdowns, while installations were slowed or cancelled.
“Now was a perfect time because we have been through the COVID test,” Sunrun chief executive Lynn Jurich said on a conference call Tuesday.
There’s evidence that the sector may be rebounding. Investor enthusiasm for rooftop-solar equities has surged after March lows, companies have lined up financings in recent weeks, and there have been efforts to ramp up the digitization of operations.
Amid the pandemic, rooftop solar “could be an industry that picks up faster than others,” Hugh Bromley, an analyst at BNEF, said in an interview. “People are staying home thinking about renovations and they’re seeing their power bills increase while they’re running the air conditioner around the clock.”
Sunrun has been America’s largest rooftop-solar company for more than two years, edging aside Tesla, which had inherited the throne from longtime king Solarcity. Tesla’s market-share has shrunk since the acquisition amid strategic shifts and competition from rooftop rivals including Sunnova energy International Inc. and Sunpower Corp.
The acquisition, which is expected to close in the fourth quarter, is an all-stock transaction, under which each share of Vivint will be exchanged for 0.55 shares of Sunrun. The combined company would have an enterprise value of us$9.2 billion, they said Monday.