- The stock value of SunEdison, the world’s biggest renewables developer, rose 35% last week after a Delaware judge ruled against a proposal to block the company's $1.9 billion acquisition of Vivint Solar, the second biggest U.S. residential solar installer. Vivint’s stock value rose 38%, Bloomberg reports.
- The ruling permits SunEdison to use $799 million from TerraForm Power, the developer’s yieldco, to partially fund the Vivint acquisition. TerraForm was established by SunEdison to monetize the utility-scale generation it builds and owns, and the Vivint acquisition looks to expand the company's footprint into the residential solar space.
- The ruling drove TerraForm’s stock value down 6.7% but it led to SunEdison’s biggest stock value gain in 14 years and the biggest for Vivint since the acquisition was announced in July. Investors, convinced the deal was a bad move, let the SunEdison stock to fall 90% after it was announced.
Hedge fund manager David Tepper had sought to block SunEdison's $1.9 billion acquisition of Vivint, Bloomberg reports, but Delware Chancery Court Judge Andre Bouchard ruled last week that Tepper's team could not prove that the Vivint deal would harm shareholders of TerraForm, whose shares dropped after news of the decision.
The aim of using TerraForm to acquire Vivint, according to the news outlet, is to allow SunEdison to hold the residential solar installer's porfolio off the developer’s balance sheet. SunEdison was in a stronger financial position when the deal was made. Now, without the transfer to TerraForm, SunEdison might have to divest the Vivint portfolio “as a distressed seller,” Credit Suisse Group analyst Patrick Jobin told Bloomberg.
SunEdison hopes this ruling will open the way to closing the deal by the end of Q1 2016.
Two recent SunEdison acquisitions may have compromised its financial leverage, leaving investors with the impression it had over-reached.
It and TerraForm Power acquired First Wind in a complex three-way deal late in 2014 that raised their combined development expectation significantly. On the strength of the deal, TerraForm’s 2015 per share dividend increased 44%.
SunEdison acquired the assets of Solar Grid Storage, one of the most promising start-ups among energy storage providers, in early 2015. Terms were undisclosed, but it was an asset transfer, with SunEdison buying all the storage company’s operating assets and pipeline.