Credit: Shutterstock photoRenewable energy company SunEdison Inc 's ( SUNE ) subsidiary TerraForm Power Inc ( TERP ) will acquire Vivint Solar Inc ( VSLR ), the second-biggest U.S. solar panel installer, for approximately $2.2 billion in cash and stock.
As per the terms of the deal, Vivint shareholders will receive $16.50 per share in cash, shares, and convertible debt - a 52% premium to Vivint's closing price of $10.88 a share on Friday. Broken down, that's $9.89 a share in cash, $3.31 a share in SunEdison stock, and $3.30 a share in SunEdison convertible debt. The deal is expected to close in the fourth quarter of the year.
With this transaction, SunEdison will enter the residential solar market, where Vivint is already a top player. Vivint's solar systems are quite popular among households as it allows homeowners to lease its systems rather than buying them outright (read: Will Solar ETFs Continue to Shine Post Q1 Results? ).
SunEdison also said that its unit TerraForm Power would eventually buy Vivint's rooftop solar portfolio of 523 megawatts, expected to be installed by year-end 2015, for $922 million.
In a news release , SunEdison CEO and TerraForm Power chairman Ahmad Chatila said "SunEdison's acquisition of Vivint Solar is a logical next step in the transformation of our platform…we expect the Vivint Solar transaction to create significant value for our stockholders through the accretion in our TerraForm Power ownership, the acceleration of our Incentive Distribution Rights and an immediate expansion of our capacity and bandwidth to grow our residential business in the U.S. and globally."
Market Impact
Vivint Solar shares jumped nearly 45% to close at $15.75 on the New York Stock Exchange on Monday. SunEdison shares were up 4% in morning trading but closed flat at $31.66, after touching a near-seven-year high of $33.44. However, TerraForm closed 6.2% lower in Monday's trading session.
Given this, solar ETFs will be in focus in the days ahead. Though known for their volatility, these products have been on investors' radar for quite some time on a booming solar industry and a promising growth outlook (read: 2 Ways to Play Solar Boom with ETFs ).
Market Vectors Solar Energy ETF (KWT)
This fund manages a $22.1 million asset base and tracks the Market Vectors Global Solar Energy Index. In total, the ETF holds 34 solar stocks in its basket, which is largely concentrated in the top 10 firms at 57%. SunEdison takes the top spot with 8.75% allocation, followed by 7.34% to SolarCity ( SCTY ) and 6.54% to First Solar Inc ( FSLR ).
In terms of country exposure, U.S. takes the top spot with 36% exposure, followed by China with one-third allocation and Taiwan (15.1%). The product has an expense ratio of 0.65% and sees paltry volume of about 2,000 shares a day. The ETF is up 7% so far this year (see: all the Alternative Energy ETFs here ).
Guggenheim Solar ETF (TAN)
This ETF follows the MAC Global Solar Energy Index, holding 29 stocks in the basket. It is highly concentrated in the top five firms with SunEdison taking the top spot here too with 9.3% exposure, followed by SolarCity and First Solar with 6.55% and 6.07% respectively. Chinese firms dominate the fund's portfolio with nearly 46.7%, followed by the U.S. (37.4%).
The product has amassed $317.7 million in its asset base and trades in good volume of more than 290,000 shares a day. It charges investors 70 bps in fees per year. The fund has gained about 10.4% in the year-to-date time frame.
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SUNEDISON INC (SUNE): Free Stock Analysis Report
VIVINT SOLAR (VSLR): Free Stock Analysis Report
MKT VEC SOLAR (KWT): ETF Research Reports
GUGG-SOLAR (TAN): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
