TerraForm adopts shareholder rights plan as Brookfield & Appaloosa attempt takeover

The yieldco’s “poison pill” was created to prevent sale of more than 15% of the company’s class A stock and to keep bidders from blocking the sale of the company.

July 25, 2016 Christian Roselund

Image: TerraForm Power

Today TerraForm Power, one of SunEdison’s two holding vehicles for renewable energy assets, announced a “Stockholder Protection Rights Agreement” which it says will allow for proposals to acquire the yieldco to be considered without being blocked by parties with an ownership stake.

This follows Brookfield Asset Management’s Friday announcement that it had joined forces with hedge fund manager David Tepper’s Appaloosa Management to buy up SunEdison’s share in TerraForm Power. SunEdison currently owns the class B “controlling” shares of TerraForm, while the class A shares are owned by private investors and the company’s executives.

A statement by TerraForm Power made it clear that the motion was a response to the bid by Brookfield and Appaloosa. Including affiliates the two companies have “aggregate economic exposure” to 34% of TerraForm Class A stock.

“The Rights Agreement was adopted in response to the potential sale of a significant equity stake in TerraForm Power by SunEdison and the announced accumulation of TerraForm Power Class A shares by entities affiliated with Brookfield Asset Management,” declared TerraForm Chair and Interim CEO Peter Blackmore in the statement.

“The TerraForm Power Board of Directors believes it is in the best interests of all TerraForm Power stockholders for acquisition proposals for all or a portion of the TerraForm Power equity interests to be able to emerge in an environment free of a blocking position accumulated by possible bidders.”

TerraForm Power currently holds around 3 GW of assets, roughly split between wind and solar. More than 3/4 of this capacity is located in the United States.

Tepper and Brookfield’s attempt to acquire TerraForm comes nearly five months after key legal rulings in cases initiated by Tepper, which likely played a role in pushing SunEdison over the edge into bankruptcy. Tepper and Appaloosa filed suit to prevent the transfer of distributed solar assets into TerraForm, which in turn potentially prevented these assets as being used for collateral for a Goldman Sachs loan in March. Later it was revealed that SunEdison needed this loan to close its acquisition of Vivint.

Now that it is under new management and in the process of restructuring under bankruptcy protection, SunEdison is clearly looking to sell its stake in TerraForm Power. The company announced today that it will be working with TerraForm Power and TerraForm Global, its other yieldco, to explore the sale of its shares in both companies, through a jointly managed sales process.

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