Stem, Inc. (NYSE: STEM) is set to acquire Also Energy Holdings, Inc. in a $695 million mixed cash and stock deal announced on December 16. Also Energy is “a global leader in solar asset management software.”
According to the filings, Stem is “a global leader in artificial intelligence (AI)-driven energy software and services.”
The deal will combine Stem’s storage optimization with Also Energy’s solar asset performance monitoring and control software to create a more complete offering for renewable energy projects. Additionally, Stem will offer Also Energy’s customers its existing energy storage solutions.
Pursuant to the deal, approximately 75% of the total consideration is in cash and the remainder is in Stem common stock. The deal is expected to be immediately accretive and “accelerate Stem’s growing, recurring software revenue and increase margins,” while emphasizing Stem’s “focus on expanding global reach and delivering high-margin software products” to customers.
As noted in the filings, AlsoEnergy generated around $49 million in revenue and 60% gross margins for its software, grid edge monitoring, controls, and services business.
“[A] combined Stem and AlsoEnergy will bring the unique software, controls, and analytics capability to accelerate the energy transition to a renewable, decarbonized future,” John Carrington, Chief Executive Officer of Stem, said in a press release. “The combined company will deliver an AI-driven software offering that we expect will simplify our customers asset management, boost 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 unlock tremendous value for customers as they increasingly focus on integrating solar and energy storage assets to optimize financial performance,” Robert Schaefer, Chief Executive Officer of AlsoEnergy, said. “The software, access to data, and technical capabilities of our combined companies will bring the next level of control and optimization to AlsoEnergy’s leading monitoring offerings, enabling a single vendor for software services across the solar and storage landscape.”
Accordingly, the transaction is expected to add value for customers, allowing them to maximize their projects with both companies’ offerings. The filings not that 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. Furthermore, this will help to expand their position in the market as they only have a 30% overlap of customers. The companies will also be able to utilize their rich datasets for enhance software development and performance, increasing their competitiveness. The transaction is anticipated to grow assets under management by 32.5 GW and grow global presence to more than 50 countries.
The transaction is expected to close in Q1 2022 subject to customary closing conditions and regulatory approval.
AlsoEnergy is represented by Goodmans LLP and its financial advisor is William Blair & Company, L.L.C. 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 it was valued at $18.19 and about a week later on December 22 the stock closed at $19.65.