Beard Energy Transition (NYSE:BRD) has entered into a definitive agreement to combine with solar developer Suntuity at an enterprise value of $249 million.

Holmdel, New Jersey-based Suntuity installs residential solar projects in 25 states through both internal sales staff and channel partners.

The combined company is expected to trade on the NYSE under the symbol “STY” once the deal is completed in the fourth quarter of 2023.

Transaction Overview

Beard Energy has about $240 million in its current trust and it has added $15 million in debt financing. Suntuity expects to add $245 million to its balance sheet through the deal after paying $10 in transaction fees.

In a zero-redemptions scenario, Suntuity shareholders would pass into the minority at close with a 39.7% stake. Public Beard Energy shareholders would meanwhile take a 48% stake. Debt providers are to receive shares equaling a 4.5% stake at close and an undisclosed number of warrants.

Beard Energy’s sponsor would see its promote convert into a 10% stake, but it has also agreed to forfeit up to 100% of its 5,570,000 promote shares depending on the total proceeds at close.

This final forfeited share count is to be reduced by the number of shares its public holders do not redeem, the number of shares existing Suntuity investors purchase pre-close and how many shares would be issuable via warrants to debt providers.

The parties have not yet filed their merger documents, but Beard Energy’s profile page will be updated once additional terms are made public.

Quick Takes: A number of SPAC deals have been built upon a series of facts that in 2023 seem obvious – climate change, incentives and user preferences are going to push a ton more homeowners to install solar panels on their homes.

So far, only about 4% have done so, which means there is still plenty of money to be made. But, the fact that penetration has remained so low despite this set of facts being true for about a decade means that there continue to be major bottlenecks at the sales and distribution level.

Nonetheless, Suntuity has demonstrated the ability to maintain a swift pace in recent years growing its annual installations at a CAGR of 42.9% from 2020 through 2023E. But, more impressive than the “what” is perhaps the “how” Suntuity has gotten there, because back in 2020 it was still generating 97% of its installs through door-to-door salespeople.

Knocking on doors is not the most scalable strategy, but it appears to have paid dividends over more diffuse and indirect efforts. Still, Suntuity has been working to get more efficient in this approach and in 2023 expects 41% of total installs to come through channel partners and 9% from digital DTC approaches.

It has made a couple of its larger strides in that pivot by investing in startups SolarQuote and BlueDot Energies. SolarQuote has a customer-facing website allowing homeowners to design and solar builds for their homes while estimating costs and financing options.

Suntuity now owns 29% of SolarQuote, which integrated more closely its own sales channels in the first quarter of this year. BlueDot meanwhile provides EV charging infrastructure, and the pair began this quarter to cross-sell one another’s products. Suntuity owns 21% of BlueDot and this represents an opportunity for Suntuity horizontally integrate products along a much broader green energy space.

The parties have not yet shared the financial results of Suntuity’s efforts over the past few years, but the announcement press release noted that it has an installation backlog of about $55 million made up of 1,152 individual installs.

That averages out to about $47,743 per pending project and assuming that is roughly representative of Suntuity’s broader work, that translates its 2,546 installs in 2022 to $121.5 million in revenue. Its projection of 4,630 installs in 2023E would meanwhile translate to $221 million.

It also gets from initial agreement to installation completion in a median of 59 days, so considering its backlog is as of March 31, 2023, it may be close to halfway through that work already.

These back-of-an-envelope revenue numbers would also value Suntuity at 2x its 2022 revenue and 1.1x 2023E. That is competitive to many of its listed peers as Sunrun (NASDAQ:RUN) trades at about 5.1x current revenue, SolarEdge (NASDAQ:SEDG) at 4.7x and Shoals (NASDAQ:SHLS) at 11.5x.

These calculations do not factor in profitability, however. This remains an unknown for Suntuity, but will be a sticking point for investors once it is a public company, if not before.

Click here for the full investor presentation.

ADVISORS

• Company
  • ROTH Capital Partners is serving as capital markets advisor
  • Loeb & Loeb LLP is serving as legal advisor to Suntuity.
• SPAC
  • Vinson & Elkins L.L.P. is serving as legal advisor to Beard