Stem, Inc. (NYSE: STEM) will acquire Also Energy Holdings, Inc. in a mixed cash and stock deal announced December 16 for $ 695 million. Also Energy is “a leading global provider of software for solar system management”.
According to the records, Stem is “a leading global provider of artificial intelligence (AI) -based energy software and services.”
The transaction will combine Stem’s storage optimization with Also Energy’s solar monitoring and control software to create a broader offering for renewable energy projects. In addition, Stem will offer Also Energy’s customers its existing energy storage solutions.
According to the transaction, approximately 75% of the total consideration is in cash and the remainder in common stock of Stem. The deal is expected to have an immediate positive impact, “accelerating Stem’s growing, recurring software revenue and increasing margins,” while underscoring Stem’s “focus on expanding global reach and delivering high-margin software products” to customers.
As noted in filings, AlsoEnergy had approximately $ 49 million in revenue and 60% gross margin for its software, grid-edge monitoring, control and service businesses.
“[A] The combination of Stem and AlsoEnergy will provide the unique software, control and analytical capabilities to accelerate the energy transition into a renewable, decarbonised future, “said John Carrington, Chief Executive Officer of Stem, in a press release. “The combined company will deliver an AI-powered software offering that we expect will make it easier for our clients to manage their assets, increase their project returns and accelerate our own growth trajectory. … This acquisition underscores our focus on expanding Stems’ global reach and delivering high-margin, market-leading software products to our customers. “
“Combining our business with Stem will create tremendous value for our customers as they increasingly focus on integrating solar and energy storage systems to optimize financial performance,” said Robert Schaefer, AlsoEnergy’s chief executive officer. “The software, data access, and technical capabilities of our combined companies will bring the next level of control and optimization to AlsoEnergy’s leading surveillance offerings and enable a single provider of software services across the solar and storage landscape.”
Accordingly, the transaction is expected to add value to customers and enable them to maximize their projects with the offerings of both companies. Filings do not say this will catapult Stem’s growing and recurring revenue through AlsoEnergy’s software-as-a-service, while Stem will bring its AI-driven approach to AlsoEnergy’s software. In addition, this will help build their market position as they only have 30% customer overlap. Companies will also be able to leverage their vast datasets to improve software development and performance, and become more competitive. The transaction is expected to increase assets under management by 32.5 GW and expand global presence in more than 50 countries.
The transaction is expected to close in the first quarter of 2022, subject to customary closing conditions and regulatory approval.
AlsoEnergy is represented by Goodmans LLP and its financial advisor is William Blair & Company, LLC. Stem is represented by Gibson, Dunn & Crutcher LLP and its financial advisor is Nomura Greentech.
Prior to the announcement, Stem’s stock was valued at $ 17.92; on the day of the announcement on December 16, the stock was valued at $ 18.19 and about a week later, on December 22, the stock closed at $ 19.65.