On Monday, July 20th, renewable energy company SunEdison, Inc. (NYSE/SUNE) said that it would buy Vivint Solar, Inc. (NYSE/VSLR) in a deal valued at about $2.2 billion, including debt, with a plan to expand in the residential and commercial solar power business. (Source: SunEdison, last accessed July 20, 2015.)
SunEdison is offering Vivint shareholders $16.50 a share, a 52% premium from Friday’s closing price of $10.88. Following the news, Vivint shares surged more than 44% to $15.69 a share and SunEdison rose roughly four percent while TerraForm slid 2.1%.
As part of the agreement, TerraForm Power, Inc. (NASDAQ/TERP), an owner of clean energy power plants, will acquire Vivint’s rooftop solar portfolio for $922 million in cash. Also, TerraForm will acquire future residential and commercial projects from SunEdison, which is expanding its residential and small commercial business unit.
The deal is part of SunEdison’s expansion strategy to market for residential and commercial solar energy. Demand for rooftop solar systems is reportedly increasing due to falling production costs that have allowed startups to sell power at prices lower than those offered by traditional utilities. SunEdison also raised its 2016 annual guidance for production by 50% to between 4,200 MW and 4,500 MW.
Vivint, the second-largest installer of rooftop solar panels behind Elon Musk-backed SolarCity Corp, has operations in seven states including California and New York.
Ahmad Chatila, SunEdison chief executive officer and Terra Form Chairman, wrote in the statement, “SunEdison’s acquisition of Vivint Solar is a logical next step in the transformation of our platform after the successful execution of our First Wind acquisition in January 2015.”
The use of solar energy is increasing and equipment costs are dropping as many firms are nearing the economics of scale which could lead to higher competition within the solar industry. For investors, we should expect more merger and acquisition in the next few years.