US-based renewable energy firm SunEdison has signed a definitive merger agreement to acquire Vivint Solar for $2.2bn, in an effort to develop its residential solar business.
Payment for the deal will be made through a combination of cash, common stocks and convertible notes.
The firm has also signed a related agreement with a subsidiary of TerraForm Power, which will acquire Vivint Solar’s rooftop solar portfolio for $922m.
The portfolio, totalling 523MW, is scheduled to be installed by the end of this year.
In the future, TerraForm Power will also take over the completed residential and small commercial projects from SunEdison’s expanded residential and small commercial (RSC) business unit.
SunEdison will finance the Vivint Solar acquisition with credit lines from Goldman Sachs Group and $922m derived through the Terraform deal.
SunEdison CEO and TerraForm Power chairman Ahmad Chatila said: "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 US and globally.
"As of the fourth quarter of 2015, our organic growth and recent acquisitions will put SunEdison on track to deploy more than 1GW per quarter."
TerraForm Power CEO Carlos Domenech said: "Vivint Solar’s profile of cash available for distribution is attractive and aligned with TerraForm’s growth profile, and the team has proven its ability to scale rapidly and successfully.
"With immediate accretion to our stockholders at initial drop-down, and the predictable flow of drop-down assets into the future, we see this acquisition as creating substantial value for our stockholders."
Vivint Solar board chairman Peter Wallace said: "We believe this transaction positions the company’s asset portfolio for accelerated future growth as part of SunEdison and TerraForm Power.
"We look forward to participating in its future success as a significant investor in SunEdison going forward."