Solar company Sunrun Inc. (NASDAQ:RUN) is taking the fight to Tesla Inc. (NASDAQ:TSLA) with a strategic acquisition of rival Vivint Solar Inc. (NYSE:VSLR). The $3.2 billion acquisition will result in an industry behemoth in the rooftop solar space. The all-stock transaction should close in the fourth quarter and will result in each share of Vivint share being exchanged for 0.55 shares of Sunrun.
Solar Industry Consolidation
A merger with Vivint should allow Sunrun to raise more capital efficiently. The deal should also allow the solar rooftop company to consolidate field operation locations between companies and save on rent as well as overhead costs.
The acquisition builds on a wave of consolidation in the space. In 2016 Tesla acquired debt-plagued Solar City Corp. SunEdison had also tried to push for a deal for clean energy giant Vivint before going bankrupt. In the recent past, Berkshire Hathaway Inc. (NYSE: BRK.A) has also completed a $4 billion acquisition of Dominion Energy Inc. (NYSE: D)
A merger of Sunrun and Vivint will result in a combined company able to provide about 75% of new residential solar leases. Likewise, the combined company will be in an excellent position to enjoy high levels of scale and efficiency.
Sunrun Chief Executive Officer, Lynn Jurich, has refuted claims that the merger will arouse antitrust concerns. The executive expects the antitrust authorities to view the merger positive for consumers given that there are more than 10,000 solar companies in the U.S. Likewise, the deal should go through given that solar industry only accounts for about 2% of the U.S electricity generation
The merger comes at a time when the U.S solar industry is reeling from the effects of coronavirus pandemic. Door to Door sales, which have been the main marketing strategy has all but ceased as states imposed lockdown to curb the spread of the deadly virus.
Fast forward, the rooftop solar business is slowly rebounding with the easing of lockdown restrictions. Investor enthusiasm is slowly inching higher companies having lined up financing deals in the recent past.
The fact that people are spending more time at home, most of them are thinking about renovations after seeing their power bills increase astronomically. The use of solar power is becoming a viable solution expected to benefit Sunrun with its merger.