Item 8.01. Other Events.
Supplemental Disclosures to the Proxy Statement/Prospectus
As previously announced, on July 6, 2020, Vivint Solar, Inc., a Delaware
corporation ("Vivint Solar"), entered into an Agreement and Plan of Merger (the
"merger agreement") with Sunrun Inc., a Delaware corporation ("Sunrun") and
Viking Merger Sub, Inc., a Delaware corporation and direct wholly owned
subsidiary of Sunrun ("Merger Sub"), pursuant to which Merger Sub will merge
with and into Vivint Solar, with Vivint Solar continuing as the surviving
corporation (the "merger").
This Current Report on Form 8-K (this "Form 8-K") is being filed to update and
supplement the joint proxy statement/prospectus (the "joint proxy
statement/prospectus") (1) included in the Registration Statement on Amendment
No. 1 to Form S-4, File No. 333-246371 (the "Registration Statement"), filed by
Sunrun with the Securities and Exchange Commission (the "SEC") on August 14,
2020 and declared effective by the SEC on September 2, 2020, (2) filed by Sunrun
with the SEC as a prospectus on September 2, 2020, (3) filed by Vivint Solar
with the SEC as a definitive proxy statement on Schedule 14A on September 2,
2020, and (4) mailed by Vivint Solar to its stockholders commencing on
September 2, 2020. The information contained in this Form 8-K is incorporated by
reference into the proxy statement/prospectus. Terms used in this Form 8-K, but
not otherwise defined, shall have the meanings ascribed to such terms in the
proxy statement/prospectus.
Following the announcement of the merger agreement and as of the date of this
Form 8-K, twelve lawsuits have been filed by alleged stockholders of Vivint
Solar and Sunrun challenging the merger.
Sunrun, Vivint Solar and the other named defendants deny that they have violated
any laws or breached any duties to Sunrun's or Vivint Solar's stockholders and
believe that these lawsuits are without merit and that no supplemental
disclosure is required to the joint proxy statement/prospectus under any
applicable law, rule or regulation. However, solely to eliminate the burden and
expense of litigation and to avoid any possible disruption to the merger that
could result from further litigation, Sunrun and Vivint Solar are providing the
supplemental disclosures set forth in this Form 8-K. The supplemental
information contained in this Form 8-K should be read in conjunction with the
joint proxy statement/prospectus, which we urge you to read in its entirety.
Nothing in this Form 8-K shall be deemed an admission of the legal necessity or
materiality under applicable laws of any of the disclosures set forth herein. To
the extent that information in this Form 8-K differs from, or updates
information contained in, the proxy statement/prospectus, the information in
this Form 8-K shall supersede or supplement the information in the proxy
statement/prospectus. The information contained in this supplement speaks only
as of September 22, 2020, unless the information specifically indicates that
another date applies. Except as otherwise described in this Form 8-K or the
documents referred to, contained in or incorporated by reference in this Form
8-K, the proxy statement/prospectus, the annexes to the proxy
statement/prospectus and the documents referred to, contained in or incorporated
by reference in the proxy statement/prospectus are not otherwise modified,
supplemented or amended.
If you have not already submitted a proxy for use at the Vivint Solar virtual
special meeting, you are urged to do so promptly. This Form 8-K does not affect
the validity of any proxy card or voting instructions that Vivint Solar
stockholders may have previously received or delivered. No action is required by
any Vivint Solar stockholder who has previously delivered a proxy or voting
instructions and who does not wish to revoke or change that proxy or voting
instructions.
Supplemental Disclosures
All page references are to pages in the joint proxy statement/prospectus, and
terms used below, unless otherwise defined, have the meanings set forth in the
joint proxy statement/prospectus.
1. The following disclosure replaces the fourth full paragraph on page 22 of
the joint proxy statement/prospectus. The modified text is underlined
below:
Additional complaints were filed on August 24, 25, 26, 27, and 31, and on
September 4, 9, 11, and 18, 2020 in the United States District Court for the
District of Delaware, the Eastern District of New York, the Southern District of
New York, and the Northern District of California. Two of the complaints name as
defendants each of the members of the Vivint Solar board and Vivint Solar
(collectively, the "Vivint Solar Defendants") and Sunrun and Merger Sub, while
the four complaints filed in the Eastern and Southern Districts of New York, one
of the complaints filed in the District of Delaware, and two of the complaints
filed in the Northern District of California name only the Vivint Solar
Defendants. One of the complaints filed in the Northern District of California
names only Sunrun and the Sunrun board as defendants. All assert violations of
Section 14(a) and 20(a) of the Exchange Act and Rule 14a-9, alleging that the
Registration Statement on Form S-4 omitted or misrepresented material
information regarding the merger. The complaints filed between August 24, 27,
and September 4, 9, 11 and 18 all additionally assert a violation of
Section 20(a) of the Exchange Act.
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2. The following disclosure replaces the third paragraph on page 74 of the
joint proxy statement/prospectus. The modified text is underlined below:
During the second half of 2019, members of Vivint Solar's management and the
Vivint Solar Board conferred with Morgan Stanley and BofA Securities and
discussed the possibility of commencing a process to explore a potential
strategic transaction. Vivint Solar ultimately selected Morgan Stanley to act as
its lead financial advisor and BofA Securities to act as an additional financial
advisor in connection with a potential strategic transaction. Vivint Solar
determined to engage two financial advisors, among other things, in light of the
potential complexity of a possible strategic transaction and the number of
prospective counterparties anticipated to be contacted in such process. Vivint
Solar selected each of Morgan Stanley and BofA Securities based on its
respective experience in transactions similar to the potential strategic
transaction, qualifications, expertise and reputation and its knowledge of
Vivint Solar and its business and the industries in which Vivint Solar conducts
its business. During this time, members of Vivint Solar management, with the
assistance of Vivint Solar's advisors, prepared a "confidential information
presentation" and assembled materials for an online data room in anticipation of
a potential strategic transaction. Representatives of 313 Acquisition also
participated in this process.
3. The following disclosure replaces the last paragraph on page 74
(continuing to the top of page 75) of the joint proxy
statement/prospectus. The modified text is underlined below:
Beginning in early January 2020, at the direction of members of the Vivint Solar
Board, representatives of Morgan Stanley and BofA Securities, on behalf of
Vivint Solar, began to contact prospective counterparties in connection with a
potential strategic transaction. During the course of the strategic transaction
outreach process, 24 prospective bidders were contacted, including 8 strategic
parties and 16 financial parties. Of the 24 prospective bidders, 15 executed
confidentiality agreements, including (1) Sunrun, (2) Party C, (3) Party D,
(4) a private equity firm ("Party G") and (5) a strategic party ("Party H"). The
15 confidentiality agreements generally restricted the counterparties from
disclosing or using Vivint Solar confidential information furnished to them by
or on behalf of Vivint Solar for any reason other than in connection with a
potential strategic transaction with Vivint Solar. None of the 15
confidentiality agreements with the potential bidders restricted them from
making unsolicited proposals to Vivint Solar or contained other standstill
restrictions. In addition, except for the confidentiality agreement with Party
C, none of the 15 confidentiality agreements with the potential bidders
restricted them from soliciting for employment and/or hiring Vivint Solar
employees. The confidentiality agreement with Party C contained a provision
prohibiting Party C from soliciting members of senior management of Vivint Solar
of whom Party C first became aware or with whom Party C first had contact as a
result of Party C's evaluation of a potential strategic transaction to terminate
their employment with Vivint Solar, subject to certain customary exceptions.
While Party F was contacted in the course of the strategic transaction process,
Party F declined to sign a confidentiality agreement and did not participate in
further conversations with Vivint Solar with respect to a potential strategic
transaction. Party A, Party B and Party E were not contacted in the course of
the strategic transaction process because a potential combination with Party A
was not expected to be attractive to the Vivint Solar Board or Vivint Solar's
stockholders, Party B had previously indicated that it was interested in
pursuing commercial opportunities with Vivint Solar rather than a potential
strategic transaction and Party E had previously proposed an unattractive
valuation for Vivint Solar and was not expected to propose a valuation that
would be attractive to the Vivint Solar Board.
4. The following disclosure replaces the first paragraph on page 80 of the
joint proxy statement/prospectus. The modified text is underlined below:
In April 2020, Sunrun management prepared certain financial forecasts in
connection with the potential transaction process, which were shared with the
Sunrun Board. Certain of these forecasts were shared with Vivint Solar and
Credit Suisse in connection with the potential transaction process. For more
information, including a description of the items used to calculate various line
items in the Sunrun Management Projections, see the section entitled "-Certain
Sunrun Unaudited Prospective Financial Information" beginning on page 126, and
the footnotes on pages 129 to 131 of this joint proxy statement/prospectus.
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5. The following disclosure replaces the second paragraph on page 87 of the
joint proxy statement/prospectus. The modified text is underlined below:
On July 6, 2020, the Sunrun Board held a virtual board meeting, which was
attended by Sunrun senior management. At the request of Sunrun senior
management, representatives of Cooley and Axinn, Veltrop & Harkrider LLP
("Axinn"), outside counsel with respect to antitrust matters to Sunrun, and
Credit Suisse, financial advisor to Sunrun, also attended the meeting.
Ms. Jurich provided an update on discussions with Vivint Solar, including that
Sunrun and Vivint Solar had agreed to an exchange ratio of 0.55. Ms. Steele then
provided the Sunrun Board with a further update on the status of diligence, and
Ms. Jurich provided an update regarding the discussions that she had with
Mr. Bywater with respect to the pre-signing employment agreements with
Mr. Bywater and Mr. Allred. Representatives of Cooley discussed the directors'
fiduciary duties in connection with the Sunrun Board's evaluation of the
potential strategic transaction with Vivint Solar. Representatives of Credit
Suisse reviewed Credit Suisse's financial analyses with respect to the
transaction and rendered Credit Suisse's oral opinion, confirmed by delivery of
a written opinion, to the Sunrun Board to the effect that, as of such date and
subject to the procedures followed, assumptions made, qualifications and
limitations on the review undertaken and other matters considered by Credit
Suisse as described in such written opinion, the exchange ratio was fair, from a
financial point of view, to Sunrun. The full text of the written opinion of
Credit Suisse is attached to this joint proxy statement/prospectus as Annex B
and is incorporated by reference in this joint proxy statement/prospectus in its
entirety. See also the section entitled "-Opinion of Sunrun's Financial Advisor"
beginning on page 98 of this joint proxy statement/prospectus. For more
information regarding the individual companies analyzed in Credit Suisse's
Selected Public Companies Analyses, see pages 101-102 in the section entitled
"-Opinion of Sunrun's Financial Advisor." Representatives of Cooley and Axinn
then provided an updated summary of the proposed terms of the merger agreement
and the employment agreements that were anticipated to be entered into in
connection with the transaction and described the resolutions the directors
would be asked to consider if they were to approve the transaction. At the
conclusion of the meeting, after careful review and discussion by the Sunrun
Board, including consideration of the factors described below under the section
entitled "Sunrun Board's Recommendation and Reasons for the Merger," the Sunrun
Board (i) approved and declared advisable, fair to and in the best interests of
Sunrun and its stockholders, the merger agreement, the merger and all other
transactions, ancillary agreements, documents and other instruments identified
in and contemplated by the merger agreement; and (ii) directed that the Sunrun
share issuance proposal and the Sunrun adjournment proposal be submitted to the
Sunrun stockholders for approval.
6. The following disclosure replaces the first sentence of the last
paragraph on page 101 of the joint proxy statement/prospectus. The
modified text is underlined below:
Credit Suisse considered certain financial data for Sunrun and Vivint Solar, as
well as Sunnova Energy International Inc., a company with publicly traded equity
securities Credit Suisse deemed similar to Sunrun and Vivint Solar in one or
more respects, including their respective industries, operations, and size.
7. The following disclosure replaces the fifth full paragraph on page 108 of
the joint proxy statement/prospectus. The modified text is underlined
below:
Morgan Stanley performed a trading comparables analysis, which is intended to
provide an implied value of a company by comparing it to similar companies that
are publicly traded. Morgan Stanley reviewed and compared publicly available
financial information for Vivint Solar with comparable publicly available
financial information for Sunrun and Sunnova Energy International Inc.
("Sunnova"). Morgan Stanley reviewed certain financial information of Sunnova, a
public company that shares similar business characteristics to Vivint Solar
based upon Sunnova's public filings, investor presentations and research analyst
reports. Morgan Stanley utilized in its analyses described below (i) a net debt
amount for Vivint Solar of $1.6 billion as of March 31, 2020 as publicly
reported by Vivint Solar and (ii) the number of outstanding shares of Vivint
Solar common stock on a fully diluted basis applying the treasury stock method
using shares, options, and restricted stock units and performance-based
restricted stock units projected by Vivint Solar's management to be outstanding
as of July 2, 2020, which projections included (A) 125.4 million shares
outstanding of common stock, (B) 5.1 million stock options at a weighted average
exercise price of $5.23, and (C) an aggregate of 6.0 million restricted stock
units and performance-based restricted stock units. The fully diluted shares
outstanding calculation excludes any dilutive effects from Vivint Solar LTIP
Awards under the Vivint Solar LTIP Plans, as defined performance targets
thereunder were not assumed to be satisfied at the valuation date.
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8. The following disclosure replaces the second and third paragraphs on page
110 of the joint proxy statement/prospectus. The modified text is
underlined below:
Morgan Stanley performed a pre-tax levered discounted cash flow analysis, which
is intended to provide an implied value of a company by calculating the present
value of the estimated future free cash flows and terminal value of such
company.
Morgan Stanley first calculated the equity value of Vivint Solar's systems
installed as of December 31, 2019, referred to herein as "Vivint Solar AssetCo",
which value was calculated as the estimated levered free cash flows that
management of Vivint Solar forecasted Vivint Solar to generate during calendar
years 2020 through 2050 from such systems, plus current unrestricted excess cash
from the Vivint Solar holding company loan facility financing announced on
June 2, 2020. Such cash flows were then discounted to present value as of
June 30, 2020 using discount rates ranging from 9.3% to 11.3%, which discount
rates were selected, upon the application of Morgan Stanley's professional
judgment and experience, to reflect a cost of equity for Vivint Solar (based on
the capital asset pricing model). As inputs to the capital asset pricing model,
Morgan Stanley took into account, among other things, risk free rate, levered
beta, historical equity risk premium and, upon the application of Morgan
Stanley's professional judgment and experience, a +/- 1.0% sensitivity
adjustment around the calculated value.
Morgan Stanley then calculated the equity value of Vivint Solar's new systems
forecasted to be installed from January 1, 2020 through 2024, referred to herein
as "Vivint Solar DevCo", which value was calculated as the estimated present
value of the levered cash flows that management of Vivint Solar forecasted
Vivint Solar to generate during calendar years 2020 through 2024 from such
systems, plus a terminal equity value based on a one-year forward EBITDA
multiple.
9. The following disclosure replaces the third paragraph on page 111 of the
joint proxy statement/prospectus. The modified text is underlined below:
For reference only and not as a component of its fairness analysis, Morgan
Stanley reviewed future public market trading price targets for Vivint Solar
common stock prepared and published by equity research analysts as of July 2,
2020 (the second to last full trading day prior to the meeting of the Vivint
Solar Board to declare the advisability of the merger agreement and the
transactions contemplated thereby, including the merger, and to approve the
merger agreement and the consummation of the transactions contemplated thereby).
These forward targets, as summarized below, reflected each analyst's estimate of
the future public market trading price of Vivint Solar common stock and were
discounted to reflect present values using Vivint Solar's cost of equity of
10.3%, which represented the mid-point of the aforementioned 9.3% to 11.3%
discount rates range, which was selected, upon the application of Morgan
Stanley's professional judgment and experience, to reflect a cost of equity
calculation for Vivint Solar (based on the capital asset pricing model). As
inputs to the capital asset pricing model, Morgan Stanley took into account,
among other things, risk free rate, levered beta, historical equity risk premium
and, upon the application of Morgan Stanley's professional judgment and
experience, a +/- 1.0% sensitivity adjustment around the calculated value.
Morgan Stanley compared the high and low price targets for Vivint Solar, each
rounded to the nearest $0.25, to construct the price target range shown for
reference.
Vivint Solar Equity Analysts Price Targets
Analyst
(Date of Report) Target Price
BofA Securities
(June 3, 2020) $ 12.50
Roth Capital Partners
(June 20, 2020) $ 15.00
Oppenheimer
(May 8, 2020) $ 11.00
JMP Securities
(June 5, 2020) $ 15.00
KeyBanc
(May 13, 2020) $ 12.00
Citigroup
(February 4, 2020) $ 11.00
Goldman Sachs
(June 24, 2020) $ 10.00
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10. The following disclosure replaces the first paragraph on page 112 of the
joint proxy statement/prospectus. The modified text is underlined below:
Morgan Stanley performed a trading comparables analysis, which is intended to
provide an implied value of a company by comparing it to similar companies that
are publicly traded. Morgan Stanley reviewed and compared publicly available
financial information for Sunrun with comparable publicly available financial
information for Vivint Solar and Sunnova. Morgan Stanley utilized in its
analyses described below (i) a net debt amount for Sunrun of $3.2 billion as of
March 31, 2020 as publicly reported by Sunrun and (ii) the number of outstanding
shares of Sunrun common stock on a fully diluted basis applying the treasury
stock method using shares, options, and restricted stock units projected by
Sunrun's management to be outstanding as of July 2, 2020, which projections
included (A) 122.4 million shares outstanding of common stock, (B) 10.5 million
stock options at a weighted average exercise price of $8.02, and (C) 4.5 million
restricted stock units.
11. The following disclosure replaces the last paragraph on page 112 of the
joint proxy statement/prospectus and the first and second paragraphs on
page 113 of the joint proxy statement/prospectus. The modified text is
underlined below:
Morgan Stanley performed a pre-tax levered discounted cash flow analysis, which
is intended to provide an implied value of a company by calculating the present
value of the estimated future free cash flows and terminal value of such
company.
Morgan Stanley first calculated the equity value of Sunrun's systems installed
as of December 31, 2019, referred to herein as "Sunrun AssetCo", which value was
calculated as the estimated levered free cash flows that Sunrun is forecasted to
generate during calendar years 2020 through 2050 from such systems. Financial
data used in this analysis was based on the forecast prepared by Sunrun's
management and assumptions from Vivint Solar's management. Such cash flows were
then discounted to present value as of June 30, 2020 using discount rates
ranging from 9.4% to 11.4%, which discount rates were selected, upon the
application of Morgan Stanley's professional judgment and experience, to reflect
a cost of equity calculation for Sunrun (based on the capital asset pricing
model). As inputs to the capital asset pricing model, Morgan Stanley took into
account, among other things, risk free rate, levered beta, historical equity
risk premium and, upon the application of Morgan Stanley's professional judgment
and experience, a +/- 1.0% sensitivity adjustment around the calculated value.
Morgan Stanley then calculated the equity value of Sunrun's new systems
forecasted to be installed from January 1, 2020 through 2024, referred to herein
as "Sunrun DevCo", which value was calculated as the estimated present value of
the levered cash flows that Sunrun is forecasted to generate during calendar
years 2020 through 2024 from such systems, plus a terminal equity value based on
a one-year forward EBITDA multiple. Financial data used in this analysis was
based on the forecast prepared by Sunrun's management and assumptions from
Vivint Solar's management for calendar years 2020 through 2024.
Morgan Stanley then estimated the terminal values of Sunrun DevCo at the end of
the forecast period by using an EBITDA trading multiple ranging from 12.0x to
16.0x applied to Sunrun DevCo's EBITDA in 2025 based on the forecast prepared by
Sunrun's management and assumptions provided by Vivint Solar's management, less
the Sunrun DevCo debt in the terminal year based on the forecast prepared by
Sunrun's management and assumptions from Vivint Solar's management, resulting in
a terminal equity value range of $566 million to $1.5 billion. The terminal
value one-year forward EBITDA trading multiple range was selected based upon the
application of Morgan Stanley's professional judgment and experience and the
two-year average one-year forward EBITDA trading multiple for Ameresco, Inc.,
Enphase Energy, Inc. and SolarEdge Technologies, Inc., which companies were
selected because they are publicly traded companies similar to Sunrun DevCo.
Such cash flows and terminal values were then discounted to present value as of
June 30, 2020 using discount rates ranging from 9.4% to 11.4%, which discount
rates were selected, upon the application of Morgan Stanley's professional
judgment and experience, to reflect a cost of equity calculation for Sunrun
(based on the capital asset pricing model).
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12. The following disclosure replaces the first paragraph on page 114 of the
joint proxy statement/prospectus. The modified text is underlined below:
For reference only and not as a component of its fairness analysis, Morgan
Stanley reviewed future public market trading price targets for Sunrun common
stock prepared and published by equity research analysts as of July 2, 2020 (the
second to last full trading day prior to the meeting of the Vivint Solar Board
to declare the advisability of the merger agreement and the transactions
contemplated thereby, including the merger, and to approve the merger agreement
and the consummation of the transactions contemplated thereby). These forward
targets, as summarized below, reflected each analyst's estimate of the future
public market trading price of Sunrun common stock and were discounted to
reflect present values using Sunrun's cost of equity of 10.4%, which represented
the mid-point of the aforementioned 9.4% to 11.4% discount rates range, which
was selected, upon the application of Morgan Stanley's professional judgment and
experience, to reflect a cost of equity calculation for Sunrun (based on the
capital asset pricing model). As inputs to the capital asset pricing model,
Morgan Stanley took into account, among other things, risk free rate, levered
beta, historical equity risk premium and, upon the application of Morgan
Stanley's professional judgment and experience, a +/- 1.0% sensitivity
adjustment around the calculated value. Morgan Stanley compared the high and low
price targets for Sunrun, each rounded to the nearest $0.25, to construct the
price target range shown for reference.
Sunrun Equity Analysts Price Targets
Analyst (Date of Report) Target Price
Roth Capital Partners
(June 20, 2020) $ 30.00
JMP Securities
(May 7, 2020) $ 19.00
Oppenheimer
(May 7, 2020) $ 23.00
Barclays
(May 18, 2020) $ 23.00
Credit Suisse
(June 15, 2020) $ 29.00
Morgan Stanley
(June 19, 2020) $ 15.00
BofA Securities
(May 20, 2020) $ 19.50
Goldman Sachs
(June 24, 2020) $ 23.00
J.P. Morgan
(June 22, 2020) $ 24.00
UBS
(May 6, 2020) $ 11.00
13. The following disclosure replaces the fourth paragraph on page 114 of the
joint proxy statement/prospectus. The modified text is underlined below:
Morgan Stanley performed a trading comparables analysis, which is intended to
provide an implied value of a company by comparing it to similar companies that
are publicly traded. Morgan Stanley reviewed and compared publicly available
financial information for the pro forma combined company with comparable
publicly available financial information for Vivint Solar, Sunrun and Sunnova.
Morgan Stanley utilized in its analyses described below (i) the combined net
debt amount for each of Vivint Solar and Sunrun as of March 31, 2020 as publicly
reported by Vivint Solar and Sunrun, respectively, and (ii) the number of
outstanding shares of Sunrun common stock on a fully diluted basis applying the
treasury stock method using shares, options, and restricted stock units
projected by Sunrun's management to be outstanding as of July 2, 2020, which
projections included (A) 122.4 million shares outstanding of common stock, (B)
10.5 million stock options at a weighted average exercise price of $8.02, (C) an
aggregate of 4.5 million restricted stock units and performance-based restricted
stock units, and (D) 75.1 million new shares of common stock issued to
stockholders of Vivint Solar in connection with the merger. The dilutive impact
of Vivint Solar LTIP Awards under the Vivint Solar LTIP Plans on the pro forma
. . .
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