ADT - Solar Acquisitions

By Duncan Ferris

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ADT Security Services (NYSE:ADT) has seen its share price climb this week after it announced a new solar acquisition

ADT Security Services (NYSE:ADT) has seen its share price climb this week after it announced a new solar acquisition. The US-based electronic security, fire protection and alarm monitoring business confirmed it will snap up Sunpro Solar.

The purchase comes at a price of $160m in cash plus approximately 77.8 million shares of ADT common stock. This implies a total enterprise value of approximately $825m. Following the acquisition, Sunpro Solar will become ADT Solar.

Why has ADT decided to diversify into solar with this acquisition?

What does ADT do?

Before examining ADT’s foray into the world of renewable energy, it’s probably worth having a quick look at where the company currently stands. The company offers alarm systems that range between professionally installed, do-it-yourself, mobile, and digital-based offerings. These cater to residential, small business, and larger commercial customers.

At present, the company’s field team visits 10,000 households per day and has a salesforce of more than 3,000 people. Boasting 200 locations and 9 monitoring centers, ADT says has the largest network of security professionals in the US.

Alongside the news of the acquisition, ADT reported a third-quarter loss of $0.07 per share, missing analysts’ expectations for a profit of $0.09 per share. However, the company’s revenue of $1.31bn beat sales expectations by around $20m. Additionally, the loss was attributed to a one-off need to upgrade outdated technology.

Why solar?

With Sunpro Solar, ADT has picked up a business that designs, installs, and maintains solar panels. It seems like a bit of a strange pairing, but there is method to ADT’s madness.

The company is hoping that its presence in people’s homes and businesses will give it easy access to potential customers for its new solar business. ADT has noted that residential solar is a highly fragmented industry without a clear and trusted brand leader.

The company was optimistic that ADT Solar would have the capacity to immediately become a leading national residential solar installer. This is due to its existing customer base and the name recognition of the brand. Additionally, ADT is optimistic that its solar arm will be able to take advantage of an existing national network of homebuilders, ADT Authorized Dealers, and retailers.

ADT president and CEO Jim DeVries commented: “We’re excited to offer consumers even more peace of mind by giving them the opportunity to power their homes with sustainable and affordable solar energy. Residential solar represents a $15bn annual market, but still only in 3% of all US homes.

“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.

“We believe we have the potential to grow ADT Solar into a multi-billion-dollar business over time as we meaningfully increase the accessibility and penetration of residential solar across America.”

ADT’s reasoning for the acquisition seems sound and it will be interesting to observe how the business’ new solar arm fares. But could we see more attention being paid to solar in the coming months?

A growing trend?

The news coming out of COP26 over the last week and a half has made it quite clear where the world is heading. Nations and businesses are committing to cutting their carbon emissions and embracing green technology. But does that mean we could see many more businesses investing in renewables like solar energy?

It’s hard to say at this point, though it does seem likely, given the need to replace fossil fuels. Another unknown at the moment is how much assistance and incentive companies will be given to ‘go green’. There have been a lot of promises at COP26, but much of that has yet to be translated into action. But how was solar faring before the climate summit?

According to Mercom Capital Group, total corporate funding in the solar sector increased by 193% in the first half of 2021, amounting to $13.5bn. Additionally, a report by the company found that solar public market financing increased by 386% during the period, with 13 deals raising a total of $3.7bn.

Notable deals from 2021 include Adani Green Energy’s acquisition of SB Energy India from SoftBank and Bharti Group for $3.5bn.

Mercom Capital Group CEO, Raj Prabhu, commented: “Investment activity continues to be robust across the solar sector and not just compared to 2020 (because of COVID). This will end up as one of the best years for solar financing since 2010.

“As the push toward the energy transition picks up speed worldwide, solar – one of the mature renewable energy resources – is benefitting enormously. Solar project acquisitions in the first nine months of 2021 have already surpassed all of 2020.”

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Topics:
Renewable Electricity
ESG

Author: Duncan Ferris

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

Duncan Ferris does not hold any position in the stock(s) and/or financial instrument(s) mentioned in the above article.

Duncan Ferris has not been paid to produce this piece by the company or companies mentioned above.

Digitonic Ltd, the owner of ValueTheMarkets.com, does not hold a position or positions in the stock(s) and/or financial instrument(s) mentioned in the above article.

Digitonic Ltd, the owner of ValueTheMarkets.com, has not been paid for the production of this piece by the company or companies mentioned above.