Will Leading SoCal Residential Solar Firm Verengo Now Be In Play?

On Thursday, the Los Angeles Business Journal reported that Verengo Solar co-founders, CEO Randy Bishop and President Ken Bishop, were leaving the company they co-founded in 2008 "to pursue other business interests."

Verengo reportedly had grown its seven-year-old residential solar business to sales of $113 million in 2013, making it the sixth-largest U.S. solar panel installer and the largest based in Southern California.

"The Business Journal and other publications reported last May that Verengo had put itself up for sale, retaining Bank of America Merrill Lynch as its adviser; the company never confirmed the reports.

"In February, Verengo sold off its Northeastern U.S. division to NRG Energy Inc NRG of Princeton, N.J. Financial terms of the sale were not disclosed, but the deal involved the transfer of more than 100 Verengo employees to NRG," the report said.

NRG is a large Northeastern utility with a market cap of over $8 billion. However, its wholly owned subsidiary, NRG Home Solar, is already active in the California residential solar market, offering 20-year leases to SoCal homeowners.

The Usual Suspects

In addition to NRG, likely suitors include: $4.9 billion cap SolarCity Corp SCTY and recent IPO, $1.37 billion cap Vivint Solar Inc VSLR, which each have significant existing SoCal residential solar sales and installation operations and are the two largest players in the space.

Related Link: Why Vivint Solar Has 100% Upside Potential

Although Vivint Solar is the smallest of the potential suitors, it was recently spun out of the Blackstone Group LP BX's Vivint residential home improvements operating company.

Vivint Solar is still 78 percent owned by Blackstone, so if an M&A deal made sense, there is certainly sufficient horsepower and access to capital markets for Vivint Solar to get a deal done.

Vivint Solar Sales Model

Currently, 95 percent of Vivint Solar's sales come from its Vivint inspired door-to-door sales force and related referrals.

All things being equal, there could be more synergies for Vivint Solar in acquiring part of all of Verengo Solar.

Vivint would be able to piggy-back its door-to-door sales efforts in targeted neighborhoods, as it integrates the installed base of existing Verengo customers onto its platform.