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Sunrun to Acquire Vivint Solar for an Enterprise Value of $3.2 Billion

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Sunrun Inc. shares traded 25% higher and reached a new 52-week high after the company reported that it has signed a definitive agreement to acquire Vivint Solar in an all-stock merger deal.

Residential solar, battery storage and energy services company Sunrun Inc. (RUN:NASDAQ) and full-service residential solar provider a Vivint Solar Inc. (VSLR:NYSE) yesterday evening announced that "the companies have entered into a definitive agreement under which Sunrun will acquire Vivint Solar in an all-stock transaction, pursuant to which each share of Vivint Solar common stock will be exchanged for 0.55 shares of Sunrun common stock, representing a combined Enterprise Value of $9.2 billion based on the closing price of Sunrun's shares on July 6, 2020."

The firms stated that after the transaction is completed, Vivint Solar and Sunrun shareholders will own approximately 36% and 64% respectively of the fully diluted shares of the combined company. The report pointed out that "the exchange ratio implies a 10% premium for Vivint Solar shares based on closing prices on July 6, 2020, and a 15% premium to the exchange ratio implied by the three month volume weighted average price of Vivint Solar and Sunrun shares."

Sunrun's CEO and co-founder Lynn Jurich commented, "Americans want clean and resilient energy. Vivint Solar adds an important and high-quality sales channel that enables our combined company to reach more households and raise awareness about the benefits of home solar and batteries...This transaction will increase our scale and grow our energy services network to help replace centralized, polluting power plants and accelerate the transition to a 100% clean energy future. We admire Vivint Solar and its employees, and look forward to working together as we integrate the two companies."

Vivint Solar's CEO David Bywater remarked, "Vivint Solar and Sunrun have long shared a common goal of bringing clean, affordable, resilient energy to homeowners. Joining forces with Sunrun will allow us to reach a broader set of customers and accelerate the pace of clean energy adoption and grid modernization. We believe this transaction will create value for our customers, our shareholders, and our partners."

After the merger is finalized, the combined entity will have a combined customer base of around 500,000 customers with over 3 gigawatts of solar assets on the balance sheet. The companies stated that residential solar has reached only about 3% penetration in the U.S. so the opportunity for future growth is still quite large. Sunrun also expects to benefit from significant cost synergies from the merger, which it estimates to total $90 million annually.

Under the terms of the definitive transaction agreement, each share of Vivint Solar common stock issued and outstanding immediately prior to the effective time of the merger will be converted automatically into the right to receive 0.55 shares of Sunrun common stock.

The report indicated that the Vivint acquisition by Solar has already been unanimously approved by the boards of directors of both companies and is expected to be completed during Q4/20 subject to subject to approval by Vivint Solar and Sunrun stockholders, regulatory approvals and other customary closing conditions.

Sunrun is headquartered in San Francisco and states that its Brightbox home battery solution offers affordable and reliable energy and that it has the capability to manage and share stored solar energy from the batteries providing benefits to households, utilities and the electric grid.

Vivint Solar is a full-service residential solar provider based in Lehi, Utah. The company designs, installs and finances solar energy systems for homeowners and offers related monitoring and maintenance services. In addition, the firm indicated that it offers solar plus storage systems with LG Chem home batteries and electric vehicle chargers with ChargePoint Home.

Sunrun began the day with a market capitalization of around $2.6 billion with approximately 120.3 million shares outstanding and a short interest of about 15.2%. RUN shares opened 12% higher today at $23.95 (+$2.61, +12.23%) over yesterday's $21.34 closing price and reached a new 52-week high price this morning of $27.59. The stock has traded today between $23.46 to $27.59 per share and is currently trading at $26.80 (+$5.46, +25.68%).

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