Not a great day for Billionaire David Tepper and the team at Appaloosa Management after a judge rejects the hedge fund manager’s claim that would have essentially blocked the $1.9 billion buyout of Vivint Solar Inc. by SunEdison Inc.
Billionaire David Tepper can’t block a key part of SunEdison Inc.’s $1.9 billion buyout of residential solar-power provider Vivint Solar Inc., a Delaware judge ruled Thursday in rejecting the hedge fund manager’s claims the deal isn’t fair to some investors.
Officials of Tepper’s Appaloosa Management LP “couldn’t prove” the terms of the Vivint acquisition harm shareholders in TerraForm Power Inc., a separately traded unit SunEdison formed to own renewable energy power plants, Delaware Chancery Court Judge Andre Bouchard concluded. While the ruling removes a key challenge to the deal, Bouchard warned SunEdison that the company still faces “serious questions” about the overall fairness of the purchase.
“The deal’s going to go through at this point,” said Michael Morosi, an analyst at Avondale Partners LLC. “Now, it’s up to SunEdison to execute. They’re picking up a business that’s been distracted for seven months.”
SunEdison shares surged 14 percent to $1.96 at 5:27 p.m., after the close of regular trading in New York.
The stock rose the most in three months after its plan to acquire Vivint was approved by that company’s investors. Vivint shareholders led by Blackstone Group LP, which owned 77 percent of the shares at the start of the year, approved the buyout Wednesday, with more than 100 million votes in favor and 101,000 against.
“We are gratified that the court denied the injunction and now we look forward to continuing to navigate current market conditions,” Ben Harborne, a SunEdison spokesman, said in an e-mailed statement.
The Maryland Heights, Missouri-based company spent billions last year acquiring developers and power projects around the world. Now it’s spending more to convert in-progress wind and solar farms into electricity-generating assets that can either be sold off or retained for their long-term revenue streams. Tepper’s challenge was seen as the most immediate threat to the company’s liquidity.
Tepper had complained in a suit filed last month that SunEdison structured the buyout to unfairly force TerraForm to load up with debt to buy about $800 million of Vivint’s assets. Appaloosa bought an almost 10 percent stake in TerraForm in November.
The hedge fund manager has opposed SunEdison’s plans for TerraForm. In a letter to directors in December, Tepper blasted a push to sell revenue streams from thousands of solar homes to the holding company. The move, he argues, will reduce the quality of TerraForm’s plants, which now supply only larger commercial, industrial and utility customers.
Tepper didn’t immediately return a phone call seeking comment on Bouchard’s ruling after regular business hours on Thursday.
Even though Bouchard didn’t block the deal, he said its overall fairness was still in question if the case goes to trial. The judge called SunEdison’s move to replace TerraForm directors who opposed the deal a “troubling aspect” of the case that may make it difficult for the renewable power company to fend off Tepper at trial.
Jeffery Osborne, an analyst at Cowen & Co., said Bouchard’s ruling should give SunEdison investors some relief.
They “were certainly fearful that TerraForm wouldn’t be writing the check for the Vivint assets and that SunEdison’s balance sheet would have to eat that additional expense,” Osborne said in an interview. “It is certainly a positive for SunEdison.”
Walking away from Vivint would probably have been a better outcome for SunEdison, Swami Venkataraman, a vice president of Moody’s Corp., said in an interview. “Purely from a credit perspective, that might be the most positive event,” he said.
Earlier this month, a New York judge blocked SunEdison from transferring some assets while investors in a Latin American power company seek more than $150 million in connection with a failed takeover bid. The parties are in talks to settle that case.
The Delaware case is Appaloosa Investment Limited Partnership I v. SunEdison Inc., CA No. 11898, Delaware Chancery Court (Wilmington).
Read More: Bloomberg