ADT on Tuesday announced it has entered into an agreement to acquire residential solar panel installation firm Sunpro Solar for $160 million in cash and approximately 77.8 million shares of ADT common stock, for a total enterprise value of $825 million.
Founded in 2008, Sunpro designs, sells, installs and maintains solar power systems on residential and commercial properties throughout the U.S. The company employs 3,600 peoples and has 56 locations spread across 22 states. In a statement, ADT said Sunpro would be rebranded as “ADT Solar” and operate as a wholly owned subsidiary of the company. Sunpro’s management team, including founder Marc Jones, will join ADT as part of the deal.
In an earnings call with the company’s investors on Tuesday, ADT President and CEO Jim DeVries explained that the acquisition of Sunpro, combined with their partnership with Google, which acquired a 6.6% stake in the company last year, marks ADT’s evolution from strictly a home security services provider to a “lifestyle and consumer technology brand.”
“Our Google partnership, along with our new solar footprint, provides us with a much larger presence in the home automation and energy management markets and are strategic steps for broadening ADT’s total addressable market,” DeVries said during the call. “These are fast-growing segments with tech-forward, as well as eco-friendly aspects that appeal to a broad range of customers. We’re in the middle of an exciting transformation.”
A Logical Expansion
According to DeVries, expanding into a solar energy is a “logical” next step for the company as it adds yet another dimension to the integrated home technology experience for today’s consumers. According to a report published by Wood Mackenzie and the Solar Energy Industries Association (SEIA) earlier this year, the U.S. solar industry grew by 43% in 2020 and is forecast to quadruple by 2030.
Sunpro itself saw a 90% year-over-year increase in installs in 2020 and has achieved $675 million in sales from approximately 15,000 installs over the last 12 months.
DeVries said that ADT has been attracted to the solar market for some time, given the increased interest from consumers in renewable energy. They were particularly attracted to Sunpro given their knowledgeable management team and reputation for customer service.
“Demand for residential solar has grown exponentially in the past several years as consumer acceptance of solar has increased and pricing has become more attractive,” DeVries added. “With solar, we see a path of significant growth ahead, as the market is already at $15 billion with only 3% home penetration. We are extremely optimistic for what solar can bring to ADT’s future and we’re confident we have the perfect partner in Sunpro.”
Additionally, DeVries said he foresees a number of cross-selling opportunities by bringing Sunpro into the ADT fold. “Principally, the big opportunity for us is on revenue synergy…and the opportunity to cross-sell into our base,” he said. “We are looking at some really interesting things around bundling smart home and solar together.”
Not An Industry First
Of course, this is not the first time that a traditional home security player has branched into the solar market. In 2011, Vivint received $75 million in financing to create a solar energy panel installation business, which the company dubbed “Vivint Solar.” Late last year, the business was sold to competitor Sunrun Inc., in an all-stock deal valued at more than $3 billion.
According to Brian Ruttenbur, Managing Director of Imperial Capital – which expects to receive or intends to seek compensation for investment banking services from ADT within the next three months – this is a much bigger investment in solar than Vivint made initially, and the move signals that the company is “truly trying to reinvent” itself.
“They are doing some things to really shake things up,” Ruttenbur says. “Let’s just say they are successful at half the things they do; this market is continuing to explode. Demand is there across the board.”
Ruttenbur also believes the government will likely offer future incentives to home and business owners that opt to install solar panels, which will increase future demand. “There’s obviously huge demand for solar,” he adds. “With future funding that probably comes down from the federal government, there should be massive incentives for solar, as there was under a previous [presidential] administration. Yes, it is expensive, but it is like buying a house or buying a car – when you bring it down to monthly payments and the federal government subsidizes, it becomes a lot cheaper.”
