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Sunrun Set to Buy Vivint Solar for $3.2B in an All-Stock Deal

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Sunrun Inc. RUN and Vivint Solar VSLR recently signed an agreement, under which the former will acquire the latter in an all-stock transaction for an enterprise value of $3.2 billion. Per the deal terms, Sunrun stockholders will own approximately 64% of the fully diluted shares of the combined company, whereas Vivint Solar will own the remaining 36%.

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

Rationale Behind the Planned Acquisition

In the United States, residential solar has reached only 3% penetration till date, which reflects ample scope for growth, going ahead. Further, in June, Wood Mackenzie forecasted 33% growth in the nation’s solar installations by the end of this year. This forecast is primarily driven by strong performance of the utility-scale segment, which is expected to account for more than 14 GW of new installations by the end of 2020. Considering such growth prospects of the U.S. solar market, Sunrun and Vivint Solar signed the buyout deal to optimize footprint, reduce spending on technology systems, scale proprietary racking technology and improve sourcing capabilities within combined supply chains.

How Will the Acquisition Benefit Sunrun?

On completion of the transaction, Sunrun will become a leading owner of solar assets on a global scale, with nearly 500,000 customers and a solar energy portfolio exceeding 3 gigawatts. The acquisition of Vivint Solar adds a complementary direct-to-home sales channel to Sunrun’s platform, increasing its realm and capabilities in the growing residential solar market. Furthermore, the acquisition will enable Sunrun to deliver estimated annual cost synergies valued at $90 million, which in turn will generate enhanced value creation for its customers and shareholders from a larger base of combined solar and battery assets.

Sunrun’s customers would also benefit a great deal as its increased scale and combined research and development (R&D) efforts will enable the company to further accelerate the adoption of renewable energy and give households more control over their energy future.

Notably, the addition of Vivint Solar into Sunrun's existing portfolio will increase the latter's operational scale and help grow its energy services network to replace centralized, polluting power plants and accelerate the transition to a complete clean energy future.

Price Performance

Shares of Sunrun have gained 54.5% in the year-to-date period compared with the industry’s 34.5% growth.



Zacks Rank & Other Key Picks

Sunrun currently carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the same space are Canadian Solar CSIQ and ReneSola. SOL. While Canadian Solar sports a Zacks Rank #1 (Strong Buy), ReneSola carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Canadian Solar delivered a positive earnings surprise of 79.89%, on average, in the trailing four quarters. The company has a long-term earnings growth rate of 32%.

ReneSola Solar delivered a positive earnings surprise of 276.67%, on average, in the trailing four quarters.

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Renesola Ltd. (SOL) : Free Stock Analysis Report
 
Canadian Solar Inc. (CSIQ) : Free Stock Analysis Report
 
Vivint Solar, Inc. (VSLR) : Free Stock Analysis Report
 
Sunrun Inc. (RUN) : Free Stock Analysis Report
 
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