Sunrun has agreed to acquire Vivint Solar for $3.2 billion in a major residential solar industry consolidation aimed at creating economies of scale to lower customer acquisition costs.
The all-stock merger of two of the top three residential solar companies solidifies Sunrunâ€™s leadership of the market. The combined company will have a share of more than 15% while nearest rival Tesla, which acquired onetime leader SolarCity in 2014, has 6%.
Sunrun has focused on financing and installing solar panels and batteries while Vivint designs and installs solar energy systems for homeowners.
â€śThis is a transformational opportunity to generate consumer and shareholder value, realize annual cost synergies and bring cleaner, affordable energy to more homes,â€ť Sunrun said in a news release.
The company expects the deal will deliver estimated cost synergies of $90 million a year.
â€śThereâ€™s a mandate to continue to lower costs,â€ť Sunrun CEO Lynn Jurich said during a conference call about the deal. â€śThe businesses are so complimentary. So for us this was the right time to pursue this.â€ť
Residential solar has reached only 3% penetration in U.S. but as Forbes reports, the industryâ€™s business model â€śrequires finding vast numbers of new customers looking to put solar on their roof. Installers expend vast resources on sales and marketing teams that, in many cases, go door-to-door to sign up new customers.â€ť
With the COVID-19 pandemic making door-to-door sales problematic, â€śSunrun and Vivint get a larger megaphone from which to advertise digitally, and the ability to scale up targeted in-person marketing across a variety of distribution channels when lockdowns ease,â€ť Forbes said.
The combined company will have a customer base of nearly 500,000, with more than 3 gigawatts of solar assets on the balance sheet.
â€śJoining forces with Sunrun will allow us to reach a broader set of customers and accelerate the pace of clean energy adoption and grid modernization,â€ť Vivint CEO David Bywater said.
Sunrun shares jumped 22.6% to $26.17 in trading Tuesday while Vivint shares soared 38.2% to $14.69. Under the terms of the deal, Vivint shareholders will receive 0.55 shares of Sunrun for each Vivint share.