Vivint Solar Acquisition Plan Triggered SunEdison’s Collapse
SunEdison (SUNEQ) announced the intent to acquire residential rooftop solar (TAN) power provider Vivint Solar (VSLR) on July 19, 2015. According to the terms of the agreement, SunEdison and its yieldco TerraForm Power (TERP) agreed to purchase Vivint Solar for $2.2 billion. It was more than a 50.0% premium to Vivint Solar’s market value at the time. The company planned to complete the purchase with available cash and leverage. However, the market reacted negatively, and the stock fell after the announcement.
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Impact on SunEdison
The deal impacted the company’s internal controls, and SunEdison hasn’t filed a 10-K or 10-Q filing. In March 2016, Vivint Solar terminated the agreement and sued SunEdison for not closing the deal according to the terms of the agreement.
As we saw in the previous part of this series, SunEdison acquired a plethora of assets without leaving much time gap between the acquisitions. The company had to fund its acquisitions mainly through debt since there wasn’t enough time between transactions to generate enough cash.
SunEdison’s debt has been increasing consistently over the years. As of September 30, 2015, its consolidated debt was ~$11.7 billion. Rising debt led to higher interest expenses, which further deteriorated the company’s cash position.
As of September 30, 2015, SunEdison’s cash and cash equivalents were $2.4 billion. Most of the cash came from its yieldcos TERP and GLBL, which are not part of the Chapter 11 filing.
SunEdison’s ongoing operations were affected by the liquidity crisis. It caused the company to miss some project deadlines and affected its already announced purchase plans.
Next, let’s take a look at the company’s business model.