SolarCity buys component supplier Zep Solar for $158 mln

LOS ANGELES Wed Oct 9, 2013 7:59am EDT

LOS ANGELES Oct 9 (Reuters) - SolarCity Corp said on Wednesday it will acquire Zep Solar, a maker of mounting systems for residential solar panels, for about $158 million in stock.

The acquisition announcement was SolarCity's second in as many months. In August, it said it would pay $120 million for direct marketing company Paramount Solar.

But the Zep Solar deal is SolarCity's first foray into providing the hardware for its rooftop solar systems. The company's chief executive, Lyndon Rive, said Zep's products cost less than rival mounting systems and have cut in half the amount of time it takes for SolarCity's installation teams to put up a typical residential system to one day from two to three days.

"The only way we can expand our growth and penetrate more markets is to reduce our fully loaded cost of installation," Rive said in an interview.

Zep's hardware eliminates the need for aluminum rails to support the panels, allowing them to lie flush against the roof. This makes systems with Zep's hardware more aesthetically appealing to customers, Rive said.

SolarCity, which is backed by Tesla Motors Inc founder Elon Musk, has grown rapidly thanks to a business model that allows homeowners to pay a monthly fee to lease solar panels, eliminating the need for a large up-front investment. But the San Mateo, Calfornia-based installer is also under pressure from investors to cut costs, which have escalated due to its dramatic growth.

Both the Zep and Paramount acquisitions are aimed at helping SolarCity meet its goal to reduce overall costs by 5.5 percent a year. Paramount's remote selling expertise will help SolarCity reduce the amount it pays to attract new customers, the company says, while the Zep deal will allow it to install more systems in less time.

Zep Solar will operate as an independent business unit of SolarCity, which plans to sell Zep's products in Australia, Germany, Japan and the United Kingdom - markets where it does not currently have a presence.

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