ADT Set to Acquire Sunpro Solar for $825M

Smart home and security company ADT is poised to expand its residential offerings with its proposed acquisition of Sunpro Solar, which will help launch ADT Solar.

Pursuant to the deal, announced Nov. 9, ADT Inc. (NYSE: ADT) will acquire Sunpro Solar (Compass Solar Group, LLC) for $160 million in cash and 77.8 million shares of ADT common stock for a total value of approximately $825 million. After which, ADT will rebrand Sunpro to ADT Solar in an effort to “enter the rooftop solar business to offer ADT customers a protected, connected, and now powered home.”

According to the press release, Sunpro was founded in 2008 and is “a leading provider of rooftop solar systems in the United States” and it “has been growing quickly with a 90 percent year-over-year increase in installs in 2020 and has a cash-flow positive, asset-light business model with more than four consecutive years of positive EBITDA. The transaction price represents 10x estimated standalone next twelve months EBITDA.”

Notably, the cash portion of the deal is expected to be used to reduce debt and seller’s taxes. Accordingly, most of the seller’s consideration is in ADT stock.

Furthermore, ADT will build ADT Solar with the help of Sunpro founder Marc Jones and the Sunpro management team as they join ADT.

“Becoming part of the ADT family will accelerate our ability to bring residential and commercial rooftop solar to more customers, helping them save money and also become more energy independent,” Sunpro founder Marc Jones said in the press release.

“With its strong focus on the customer, Sunpro is the perfect partner for ADT and a logical extension of our ecosystem, unlocking an integrated home experience that includes security, automation, and energy management,” Jim DeVries, ADT President and Chief Executive Officer, said in the press release. “Residential solar represents a $15 billion annual market, but still only in 3 percent of all U.S. homes, DeVries continued. With more than 6 million ADT customers and our best-in-class sales force and marketing channels, we will be well-positioned to further scale ADT Solar while lowering customer acquisition costs and accelerating overall solar adoption.”

The transaction has strategic and financial benefits, according to the filing. Specifically, it will help increase the total addressable market by allowing ADT to expand its offerings and presence in peoples’ homes, allow ADT Solar to be a brand and market leader, enable ADT to cross-sell to its more than six million security customers, use its partnership network, the transaction is projected to be immediately positive to EBITDA and free cash flow and accretive to EPS within the first 12 months before any synergies, it will also leave minimal impact on the balance sheet – ADT will assume $20 million in vehicle loans and leases and other existing debt with be resolved with the deal’s cash proceeds upon closing.

The deal, subject to customary closing conditions and regulatory approval, is expected to close by the end of 2021.

Sunpro Solar is represented by Vinson & Elkins LLP and its financial advisor is Deutsche Bank Securities Inc. ADT is represented by Morgan, Lewis & Bockius LLP and its financial advisor is Citi.

Before the announcement, ADT’s stock on Nov. 8 was $9.00, and on Nov. 9 on the day of the announcement stock closed at $10.09, and about a week later on Nov.17 stock closed at $9.20.

Some of ADT’s previous deals include its acquisition of Red Hawk Fire & Security Holding Inc. in 2018 for $317.5 million and announced in January 2020 its plan to acquire its largest independent dealer, Defender Holdings, Inc., for $381 million in moves to expand market positioning and growth.