TerraForm, SunEdison Get a Discount on Vivint Acquisition

It’s no big secret that the deal struck by SunEdison Inc. (NYSE: SUNE) and its yieldco TerraForm Power Inc. (NASDAQ: TERP) to acquire rooftop solar installer Vivint Solar Inc. (NASDAQ: VSLR) has decimated the share prices of both SunEdison and TerraForm. The $2.2 billion deal was in danger of being withdrawn and that would have been bad for Vivint as well.

In a deal announced Wednesday morning, SunEdison and TerraForm have cut the cash portion of the deal by about $2 a share and shaved $0.75 per share off the stock part of the deal, according to The Wall Street Journal. Under the initial deal, Vivint shareholders would have received about $16.50 a share, comprised of $9.89 a share in cash, $3.31 per Vivint share in SunEdison stock and $3.30 per Vivint share in SunEdison convertible notes.

To pay for all that, SunEdison was going to put TerraForm on the hook for $923 million, based on Vivint’s installed base. That has now been reduced to $799 million due to an adjustment in the per-watt price worth about $30 million and another adjustment worth approximately $93 million based on reduced megawatt volume. By using an existing aggregation facility that is already in place, TerraForm reduces its out-of-pocket cash payment to SunEdison by about $236 million to an estimated total of $563 million. TerraForm also said it is “actively evaluating selling some or all of this initial portfolio to a third party.

All in all, SunEdison and TerraForm have restructured the acquisition of Vivint into terms that are far less onerous to TerraForm. It’s probably fair to assume that last week’s stinging letter from hedge fund manager David Tepper to TerraForm’s board woke the two companies up to the trouble they could be facing from disgruntled TerraForm investors. SunEdison has already cancelled a project in Brazil that cut $250 million in near-term costs and about $4 billion in long-term costs to its other sponsored yieldco, TerraForm Global Inc. (NASDAQ: GLBL).

Investors were voting with their feet Wednesday morning, running after TerraForm shares and driving the price up to an intraday high of near $11.60, sharply higher than Tuesday’s closing price of $8.66. The stock’s 52-week range is $6.73 to $42.66.

SunEdison’s stock traded up nearly 17% in the noon hour, at $4.02 in a 52-week range of $2.55 to $33.45.

Vivint’s stock has added nearly 15% to trade at $9.64, in a 52-week range of $6.59 to $16.00.
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