Sungevity is going public on the Nasdaq via a merger with Easterly Acquisition Corp., a special-purpose acquisition company, in a deal that values thesolarsales and customer-acquisition platform company at $357 million.
In the past, GTM has suggested that Sungevity might be an IPO candidate -- but this was unexpected. We estimate that Sungevity has received more than $200 million in equity funding -- so the bottom line is that this is not a spectacular, high-multiple venture capital exit. But it's a way for Sungevity to gain access to public markets and to stay relevant in the volatile residential solar market.
Sungevity raised $650 million in project finance and equity funding from private equity giant Apollo Global Management last year with total investment of more than $850 million in VC and project financing from investors including BrightPath Capital Partners, home improvement store Lowe's, Vision Ridge Partners, Oaklandimpact, Greener Capital, Firelake Capital, Craton Equity Partners and Eastern Sun Capital Partners. European utility E.ON was an investor in Sungevity's $70 million funding round last year, along with Jetstream Ventures and GE Ventures.
The company claims it can quickly deliver a firm price quote for residential solar rooftop systems without having to pay a visit to the roof site. It aims to own the customer experience from sale though installation and operations and maintenance. Last year, Sungevity moved into the small commercial market and partnered with commercial-scale solar financier Sol Systems.
Andrew Birch, Sungevity’s CEO, has said that unlike SolarCity or Sunrun, his firm was a "disrupter platform in a world of vertically integrated solar companies." He said that he "continues to believe that the platform wins." The company contrasts Sungevity as "an asset-light, sustainable business model that is scalable, thrives on relatively modest levels of capital and enables a path to profitability and cash flow generation. This stands in sharp contrast to the capital-intensive, asset-driven and vertically integrated model now ubiquitously deployed in today’s downstream solar market." (SolarCity currently finds itself on the precipice of a merger with Tesla.)
GTM spoke with Birch and the principals of Easterly Acquisition, Chairman Darrell Crate and CEO Avi Kalichstein. Easterly Acquisition Corp. is a Nasdaq-listed blank-check company formed in August of last year when it raised $200 million in an IPO looking to enter "into a merger, capital stock exchange, asset acquisition, stock purchase, or reorganization with a focus on the financial services industry."
Crate said, “Sungevity makes solar simple, and now will provide public investors the opportunity to gain exposure to the accelerating growth of the solar adoption curve."
Here are some details of the deal, according to the company.
- "All of the outstanding equity and convertible debt of Sungevity will be converted into shares of Easterly common stock."
- When the deal is done, Easterly will change its name to Sungevity Holdings, keeping CEO Andrew Birch along with Sungevity’s management team. The new board will be made up of members from the boards of both Easterly and Sungevity.
- Sungevity’s current stockholders will roll over their existing equity into Sungevity Holdings and, together with Sungevity’s management, retain approximately 58.8 percent ownership.
- "Sungevity stockholders and management will receive 35.7 million shares of Easterly common stock for implied total consideration of $357 million (which includes fees and expenses), assuming a $10.00-per-share valuation for the shares of Easterly common stock. It is estimated that the $200 million contained in Easterly’s trust account, less fees and expenses and amounts distributed upon redemption of shares of Easterly common stock, will be used following the closing by Sungevity for its business operations and will remain on its balance sheet."
- "The anticipated initial implied market capitalization, including fees and expenses, is estimated to be approximately $607 million, assuming no redemptions by Easterly stockholders."
The transaction has been approved by the boards of directors of both Easterly and Sungevity, and is expected to close in the third or fourth quarter of 2016.
Easterly Acquisition Chairman Darrell Crate sees his firm's value as a "strong steward of public capital," adding, "It's really a business that invests in platform businesses and builds them. One of our most recent transactions was a company called Easterly Government properties. It trades under the ticker symbol of DEA, and there's an analogy. We found a team of folks who had a very unique strategy, and that was investing in mission-critical government buildings -- they are the largest landlord to the Drug Enforcement Administration."
Crate said, "Enormous compliments to this management team. We believe they can execute; we have deep appreciation for the customer service experience they deliver. We also hear investors want exposure to the accelerating growth in the solar adoption curve. And we have very strong conviction in the ability for it to be welcomed and well received by public share holders."
"The S4 will be filed in a week, Avi and I will join the board. We will also become the chief bottle washers in the [Andrew Birch Sungevity] army. And we believe that we are going to work very hard to help the company build channel partnerships and help...the company be a very strong public entity."
"I think all of us believe that there's this transformation in the energy industry, but [the market doesn't] understand some of the players in this space, so simplicity, I think, will be our friend.
"But being a strong steward of public capital is what ultimately leads to enduring success. And we believe with this team we have a very long horizon for working closely with them and making that happen. We believe in the simple business model of selling systems and making a margin, and that being the moment that begins a 20-year journey with a customer with an outstanding positive experience that has enormous value," said Crate.
There will be a shareholder vote on the merger on September 30.