Brookfield offers $1.8B to acquire TerraForm
Toronto-based asset manager makes play for owner of clean power assets
TORONTO Brookfield Asset Management Inc., Canada’s largest alternative asset manager, said it’s prepared to offer US$13 a share in cash to acquire TerraForm Power Inc., valuing the yieldco at about US$1.8 billion.
The Toronto-based asset manager said it’s also prepared to make an offer for another unit of bankrupt SunEdison Inc., TerraForm Global Inc., for an undisclosed sum, according to a letter released in a filing on Friday. The offer is below TerraForm Power’s Thursday closing price of US$13.01 a share, and well below its US$42 peak in April 2015.
The company’s market value has slumped in the past 18 months as SunEdison’s fortunes waned after a US$2.6 billion buying spree left it overextended.
Sachin Shah, Brookfield senior managing partner and CEO of Brookfield Renewable Partners, said the valuation is fair given the current state of the market, noting that it’s 49 per cent above the closing price on June 28, the day before Brookfield initially disclosed its holdings.
“We firmly believe these proposals represent unique, extremely attractive opportunities for TERP and GLBL shareholders, as well as the creditors of SunEdison,” Shah said in the letter to the companies’ boards, using the stock tickers for the two TerraForm companies.
He said TerraForm Power and TerraForm Global should act quickly to avoid further “diminution of value,” and is seeking a response by the end of business hours Monday.
MARKET VALUE
Brookfield and billionaire David Tepper’s Appaloosa Management LP are prepared to enter into a binding agreement, subject to due diligence, by Dec. 6 for an all-cash offer for TerraForm Power, according to the letter. Alternatively, it would make an all-cash offer for a 50-60 per cent stake, in connection with a long-term agreement where Brookfield would become a financial sponsor.
Brookfield is also prepared to act as interim sponsor for both companies for as long as six months under the assumption that if its proposal was accepted, it would continue in that role.
Brookfield and Appaloosa, which collectively hold about 34 per cent of TerraForm Power’s Class A shares, attempted to take control of the company earlier this year by offering to acquire SunEdison’s stake in the company, kicking off a formal auction for the company.
Brookfield last week also disclosed it has proposed buying TerraForm Global as part of a deal for TerraForm Power.
The latest disclosure comes days after TerraForm Power said it’s again seeking an extension from bondholders over its failure to file its 2015 annual report. The delay, which puts the company at risk of default, is the result of TerraForm Power’s reliance on SunEdison’s reporting systems. SunEdison’s filings are also delinquent.
Shah expressed concerned that there would be a “price” paid to bondholders for their consent to such requests. He said he was also concerned that bondholders might not agree, and push the company into bankruptcy protection. Brookfield’s proposal was meant to stave off both outcomes, he said.
Spokesmen for TerraForm Power and SunEdison didn’t immediately return calls seeking comment. A representative for Brookfield declined to comment.
SunEdison founded and controls the TerraForm yieldcos. SunEdison’s Class B shares in TerraForm Power give it about 84 per cent of the voting rights while holding about 35 per cent of the total shares outstanding, according to a July 26 regulatory filing.
In the third quarter, the TerraForm yieldcos managed to convince bondholders to extend the deadline to file the 2015 report and its first-quarter report to Dec. 6.
In May, bondholders slapped the Bethesda, Md.-based yieldco with notices of default for failing to file the annual report. That left TerraForm with about 90 days to file or extend the deadline — or face a demand for accelerated payments.
TerraForm Power said Nov. 15 that it’s again seeking extensions under its 2023 and 2025 bond packages, which would waive any and all defaults “as a result of the expiration of the August waiver.”
In bankruptcy court Thursday, SunEdison acknowledged that it may need to reorganize around its yieldcos, which are two of its most valuable assets. The yieldcos, meanwhile, are attempting to untangle themselves from SunEdison — potentially through a sale.
Besides Brookfield, D.E. Shaw & Co., Golden Concord Holdings Ltd., and funds of BlackRock Inc. have expressed interest in TerraForm Power, which owns assets in OECD countries including the U.S. TerraForm Global owns assets in India and Brazil.
We firmly believe these proposals represent unique, extremely attractive opportunities for (TerraForm) shareholders.