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8point3 Energy Inks $1.7B Merger Deal With Capital Dynamics
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8point3 Energy Partners LP recently announced a merger agreement with Capital Dynamics — a Swiss-based asset management firm. Per the terms of the deal, Capital Dynamics’ subsidiary CD Clean Energy and Infrastructure will acquire 8point3 Energy for an enterprise value of $1.7 billion.
Notably, 8point3 Energy is a growth-oriented joint venture (JV) formed by First Solar (FSLR - Free Report) and SunPower (SPWR - Free Report) for acquiring and operating solar energy generation projects.
Details of the Deal
The definitive acquisition agreement entitles Capital Dynamics to take over the entire outstanding Class A shares, outstanding common and subordinated units along with the incentive distribution rights in OpCo — JV’s operating company.
The agreement’s proposed transaction value is about $977 million in equity value. The deal is expected to close in the second or third quarter of fiscal 2018.
Under the terms of the agreement, First Solar and SunPower, being holders of common and subordinated units in OpCo, will receive $12.35 per share in cash. The companies will also get a preset daily amount from generated cash, less any distributions received after the deal’s execution and before the closure.
However, the closure of the deal remains subject to a number of regulatory conditions although it has received approval from 8point3 Energy’s management.
Our View
8point3 Energy was formed with the objective of acquiring high-quality solar assets, primarily developed by its sponsors, i.e. First Solar and SunPower. However, over the last few quarters, the JV has not been able to effectively generate results on its planned growth strategies. In particular, the JV’s higher cost of capital and difficulty in accessing the capital markets on a regular basis resulted in several replacements of projects under the Right of First Offer (ROFO) arrangements. Moreover, 8point3 Energy recently waived its rights to acquire a number of ROFO projects from the sponsors. As a result, the sponsors sold those, waived projects to third party buyers at purchase prices higher than those offered to the JV.
We believe these developments led to the decision of the sale of the JV.
8point3 Energy comprises approximately 710 MWdc of net generation capacity in fully operational, U.S.-based solar assets and the recent acquisition will add to Capital Dynamics significant global footprint of solar, wind, biomass, combined-cycle gas and waste gas-fueled power generation technology investments.
We expect this strategic merger to provide Capital Dynamics with a competitive advantage through lower cost of capital, improved visibility, stronger balance sheet and attractive financing options for existing and future projects. This will eventually help the company achieve its long-term investment objectives.
Along with the buyout news, the JV reported fourth-quarter 2017 results and issued 2018 outlook. The company generated revenues of $15.8 million in the fourth quarter, up 6.2% year over year.
For first-quarter 2018, the JV projects revenues in the range of $9-$10 million, net income in the band of $1.5-$3.5 million, and cash of $14.5-$16.5 million available for distribution.
Price Movement
Shares of 8point3 Energy plunged 11.5% following the news, reflecting investors’ dissatisfaction.
Sunrun posted an average positive earnings surprise of 75.67% for the past four quarters. The Zacks Consensus Estimate for first-quarter 2018 earnings rose by 29 cents over the last 90 days.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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8point3 Energy Inks $1.7B Merger Deal With Capital Dynamics
8point3 Energy Partners LP recently announced a merger agreement with Capital Dynamics — a Swiss-based asset management firm. Per the terms of the deal, Capital Dynamics’ subsidiary CD Clean
Energy and Infrastructure will acquire 8point3 Energy for an enterprise value of $1.7 billion.
Notably, 8point3 Energy is a growth-oriented joint venture (JV) formed by First Solar (FSLR - Free Report) and SunPower (SPWR - Free Report) for acquiring and operating solar energy generation projects.
Details of the Deal
The definitive acquisition agreement entitles Capital Dynamics to take over the entire outstanding Class A shares, outstanding common and subordinated units along with the incentive distribution rights in OpCo —
JV’s operating company.
The agreement’s proposed transaction value is about $977 million in equity value. The deal is expected to close in the second or third quarter of fiscal 2018.
Under the terms of the agreement, First Solar and SunPower, being holders of common and subordinated units in OpCo, will receive $12.35 per share in cash. The companies will also get a preset daily amount from generated cash, less any distributions received after the deal’s execution and before the closure.
However, the closure of the deal remains subject to a number of regulatory conditions although it has received approval from 8point3 Energy’s management.
Our View
8point3 Energy was formed with the objective of acquiring high-quality solar assets, primarily developed by its sponsors, i.e. First Solar and SunPower. However, over the last few quarters, the JV has not been able to effectively generate results on its planned growth strategies. In particular, the JV’s higher cost of capital and difficulty in accessing the capital markets on a regular basis resulted in several replacements of projects under the Right of First Offer (ROFO) arrangements. Moreover, 8point3 Energy recently waived its rights to acquire a number of ROFO projects from the sponsors. As a result, the sponsors sold those, waived projects to third party buyers at purchase prices higher than those offered to the JV.
We believe these developments led to the decision of the sale of the JV.
8point3 Energy comprises approximately 710 MWdc of net generation capacity in fully operational, U.S.-based solar assets and the recent acquisition will add to Capital Dynamics significant global footprint of
solar, wind, biomass, combined-cycle gas and waste gas-fueled power generation technology investments.
We expect this strategic merger to provide Capital Dynamics with a competitive advantage through lower cost of capital, improved visibility, stronger balance sheet and attractive financing options for existing and
future projects. This will eventually help the company achieve its long-term investment objectives.
8point3 Energy Partners LP Price and EPS Surprise
8point3 Energy Partners LP Price and EPS Surprise | 8point3 Energy Partners LP Quote
Q4 Updates
Along with the buyout news, the JV reported fourth-quarter 2017 results and issued 2018 outlook. The company generated revenues of $15.8 million in the fourth quarter, up 6.2% year over year.
For first-quarter 2018, the JV projects revenues in the range of $9-$10 million, net income in the band of $1.5-$3.5 million, and cash of $14.5-$16.5 million available for distribution.
Price Movement
Shares of 8point3 Energy plunged 11.5% following the news, reflecting investors’ dissatisfaction.
Zacks Rank & Key Pick
8point3 Energy carries a Zacks Rank #4 (Sell). A top-ranked stock in the same sector is Sunrun Inc. (RUN - Free Report) , which sports a Zacks Rank #1 (Strong Buy) You can see the complete list of today’s Zacks #1 Rank stocks here.
Sunrun posted an average positive earnings surprise of 75.67% for the past four quarters. The Zacks Consensus Estimate for first-quarter 2018 earnings rose by 29 cents over the last 90 days.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>