SunEdison Inc. said it will entrench its position as one of the “super majors” of the solar power industry with the $2.2 billion purchase of rooftop panel installer Vivint Solar Inc.
The two agreed to combine for cash, shares and debt that value Vivint at 52 percent more than last week’s closing stock price. SunEdison will finance the deal with credit lines from Goldman Sachs Group Inc. and by selling $922 million of assets to TerraForm Power Inc.
SunEdison Chief Executive Office Ahmad Chatila has been on a buying spree this year, snapping up wind, solar and hydroelectric assets around the globe. Vivint, the second biggest U.S. residential and commercial developer, will provide SunEdison and TerraForm with a U.S. growth engine that’s taking advantage of declining costs of solar energy.
“They’re giving us huge bandwidth to expand in the U.S.,” Chatila said on a conference call on Monday. “This gives us unabated growth for 20 years.”
Based in Maryland Heights, Missouri, SunEdison has built itself mostly with utility-scale and large industrial photovoltaic projects.
Vivint Solar is controlled by a Blackstone Group LP affiliate after its initial public offering last year and installs rooftop units for homeowners and businesses. That end of the industry is booming as the costs of panels plunges and has been dominated by SolarCity Corp., backed by Elon Musk.
Vivint Chairman Peter Wallace, who is a senior managing director at Blackstone, said “this transaction positions the company’s asset portfolio for accelerated future growth.” Blackstone’s affiliate, 313 Acquisitions LLC, owns 77 percent of the shares of Vivint Solar and agreed to vote in favor of the deal. Blackstone still owns Vivint Inc., an energy automation company that sells units helping homeowners govern their own power consumption.
SunEdison’s plan is to expand its business installing solar power plants, taking on Vivint’s management to help oversee the process. It will sell units that are already operating to TerraForm Power.
Together, the transactions give SunEdison capacity to grow and executives skilled in doing deals. It also shifts more assets into TerraForm, an entity known as a “yieldco” designed to pay investors a dependable flow of income generated from the power plants it operates.
“We want to accelerate how fast we penetrate that market,” Julie Blunden, SunEdison’s chief strategy officer, said in a phone interview. “We’re just seeing the first of the renewables supermajors and SunEdison will be at the top.”
Vivint Solar holders will receive $16.50 a share, consisting of $9.89 in cash, $3.31 in SunEdison stock and $3.30 in convertible notes, according to a regulatory statement. That’s a 52 percent premium over Vivint’s closing price Friday of $10.88 a share.
TerraForm Power Inc. will acquire Vivint Solar’s rooftop portfolio, consisting of 523 megawatts to be installed by year-end, according to the statement. Vivint, the second biggest U.S. residential and commercial developer, will continue to expand and fold assets into TerraForm.
TerraForm Power, a unit SunEdison created to own and operate power plants, sold shares in an initial public offering in July 2014.
“This transaction with SunEdison delivers to Vivint Solar’s stockholders excellent value for the business we have built over the last four years,” said Greg Butterfield, Vivint Solar’s chief executive officer. “SunEdison and TerraForm Power have built a unique model that recognizes the value of long- term, predictable, contracted cash flows from our residential solar portfolio while providing access to a broad pool of financing at an attractive cost of capital.”
SunEdison said the transaction will help boost its 2016 installations by about 50 percent to a range of 4,200 megawatts to 4,500 megawatts. It raised its guidance for installations this year and said TerraForm may pay a dividend of as much as $1.75 a share in 2016, a 30 percent increase on its previous outlook.
“Guidance for 2016 is higher than our initial expectations,” Jeffrey Osborne, an analyst at Cowen & Co. in New York, said in a note to clients. “SunEdison continues to be our top idea in the solar complex.”
©2015 Bloomberg News
Lead image: Solar Power on a Red Roof. Credit: Shutterstock.