Almost a year after the bankruptcy of SunEdison, the company’s empire is finally being fully carved up. This morning the announcement came that Canada’s Brookfield Asset Management has entered into a deal to take control of yieldcos TerraForm Power and TerraForm Global, and their combined 3.9 GW of renewable energy assets.
Brookfield, which had long been eyeing TerraForm, will do this for an even lower price than previously expected. Two months ago Brookfield offered $11.50 per share to buy all outstanding shares of TerraForm Power, but today the companies revealed that a 51% stake will be sold to Brookfield at only $11.46 per share. This is a $0.13 per share discount for what TerraForm Power closed at yesterday, but around the mid-point of what the stock traded at over the last month.
Under the deal Brookfield will acquire 65 million more shares in addition to what it currently owns in TerraForm for a total value of $745 million, and will also provide a $500 million sponsor equity line to support future growth. The actual form of the transaction will be a special dividend of $1.94 per share for existing TerraForm shareholders, as well as either $9.52 per share in additional cash or one share in TerraForm post-closing.
For this, Brookfield gets a controlling stake in TerraForm’s 3 GW of operational wind and solar assets and will take over as sponsor of the company. As part of this deal, TerraForm Power will gain a 3.5 GW right of first offer portfolio of wind and solar projects from Brookfield, although Brookfield has not clarified how much of this is wind and how much is solar.
“The transaction also mitigates the risk of stand-alone operations and provides the best value for our shareholders of any of the options evaluated,” noted TerraForm Power CEO Peter Blackmore on an investor call.
Brookfield will buy TerraForm Global outright by acquiring 100% of its outstanding shares. According to Global, the Canadian asset manager will pay $787 million in cash and assume $455 million in debt, for a total cost for $1.3 billion, or $1.37 per watt for the company’s 952 MW of wind and solar projects in seven developing nations.
TerraForm has also entered into a settlement agreement with SunEdison, under which SunEdison will release all claims to TerraForm. Under the agreement SunEdison’s stake in TerraForm’s share capital will increase to 37%, by the issuance of 6.6 million in new shares prior to the close of the sale.
Brookfield expects the two transactions to close in the second half of 2017 subject to closing conditions, including approval by a majority of Class A shareholders at both companies. The settlement agreement, as well as the entire deal, still requires the approval of U.S. bankruptcy courts as well.
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“or one share in TerraForm post-closing.”
I don’t understand that. Let’s say you hold 100 shares of TerraForm Power – you’ll receive the special dividend of $1.94 per share, but the either/or part of this is confusing. Can you clarify?
I would be in a better position to explain this if I understood it myself. Here’s the relevant line from TerraForm Power’s 8K:
“At the effective time of the Merger, each share of Class A common stock of the Company, par value $0.01 per share (the “Class A Shares”), issued and outstanding immediately prior to the effective time of the Merger (other than the Excluded Shares (as defined in the Transaction Agreement)), will be converted into the right to, at the holder’s election and subject to proration as described below, either (i) receive $9.52 per Class A Share, in cash, without interest (the “Per Share Cash Consideration”) or (ii) retain one share of Class A common stock, par value $0.01 per share, of the Surviving Corporation…”
So my understanding is that you can keep your stock and get the dividend, or you can get the $11.46/share.
You can read the relevant 8K here: http://www.terraformpower.com/phoenix.zhtml?c=253464&p=irol-SECText&TEXT=aHR0cDovL2FwaS50ZW5rd2l6YXJkLmNvbS9maWxpbmcueG1sP2lwYWdlPTExNDUwOTg4JkRTRVE9MCZTRVE9MCZTUURFU0M9U0VDVElPTl9FTlRJUkUmc3Vic2lkPTU3