December 9, 2015 / 2:42 PM / in 2 years

SunEdison's yieldco to pay less for Vivint Solar's assets

(Reuters) - SunEdison Inc’s SUNE.N yieldco will now buy Vivint Solar Inc’s (VSLR.N) rooftop solar assets for a smaller amount, bowing to pressure from activist hedge fund Appaloosa Management.

Vivint Solar technicians install solar panels on the roof of a house in Mission Viejo, California October 25, 2013. REUTERS/Mario Anzuoni

SunEdison’s stock rallied as much as 27 percent after the company said it received a $250 million loan from Blackstone Group LP (BX.N).

Shares of the yieldco, TerraForm Power Inc (TERP.O), also jumped nearly 34 percent.

Appaloosa’s David Tepper has been calling on TerraForm Power to “resist” the Vivint deal, saying it was a departure from the company’s business model and would put shareholders at risk.

Yieldcos typically have long-term agreements to sell power to utilities, which bring in more stable cash flows than residential solar assets.

SunEdison, which will buy Vivint and then drop down some assets into TerraForm Power, is also cutting its purchase price to $15.25 per share from $16.50.

Under the new merger agreement, Vivint can also solicit competing offers, while SunEdison is free to look for third-party buyers for the assets it was originally supposed to drop down into TerraForm Power.

SunEdison has said it will slow asset sales to its two “yieldcos”, battering shares of the company as well as those of its yieldcos this year.

The company cut the cash portion of its offer for Vivint by $2.00 to $7.89 per share, while raising the stock component by 75 cents per share.

“Ideally, I think, most investors would be happy to not see the transaction take place,” said S&P Capital IQ analyst Angelo Zino. “The fact that we did see a modified version of the terms of the deal ... I think is somewhat positive news.”

TerraForm Power will now pay about $799 million for 523 megawatts of Vivint’s portfolio, lower than the initial purchase price of $922 million.

SunEdison said it expects the Vivint deal to close in the first quarter of 2016.

Vivint Solar’s shares rose as much as 20 percent, after the revised terms allayed concerns that the deal could be called off.

Reporting by Sneha Banerjee and Tanvi Mehta in Bengaluru; Editing by Sriraj Kalluvila

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