Vivint Says SunEdison's `Buyer's Remorse' Emerged After Deal

  • SunEdison CEO Chatila sought to renegotiate deal in October
  • Vivint canceled $1.9 billion deal with SunEdison Monday

SunEdison Inc. Chief Executive Officer Ahmad Chatila had doubts about buying Vivint Solar Inc. soon after striking the deal, according to a lawsuit filed by Vivint.

“Almost immediately after the deal was inked, however, with its stock price starting to fall, SunEdison began exhibiting classic signs of buyer’s remorse,” Vivint said in the suit, filed Tuesday in Delaware chancery court.

SunEdison’s shares began sliding the day the deal was announced, July 20, and have slumped more than 90 percent since then. The world’s biggest renewable energy developer called the acquisition an important part of its growth strategy, and repeatedly said last year that it intended to close the transaction. Vivint’s complaint contradicts that narrative, citing “months of foot-dragging and double-talk.”

The Vivint deal capped months of dealmaking, as SunEdison bought projects and developers on six continents. It meant the company was working to digest previous acquisitions while putting together its biggest deal ever, and as this was happening, capital markets started drying up, according to Jeffrey Osborne, an analyst at Cowen & Co.

‘Lack of Capital’

“A perfect storm of events occurred all around the same period,” Osborne said in an e-mail Wednesday. “With the lack of capital availability the company had to manage the timing of the M&A as well as the nearly three gigawatts of projects under construction, which was clearly a challenge.”

Vivint canceled the deal after SunEdison missed a Feb. 26 deadline. The transaction was valued at $2.2 billion when it was announced in July, and renegotiated in December to $1.9 billion. Vivint is seeking damages for what it terms SunEdison’s “willful breach” of the agreement.

“The only justification SunEdison attempted to offer for its failure to close is that it had been unable to secure financing for the transaction,” according to the suit. “But, critically, SunEdison’s failure to obtain financing did not excuse its failure to close because the amended merger agreement explicitly provides that securing financing is not a condition to defendants’ obligation to close.”

SunEdison didn’t respond to calls and e-mail seeking comment on the suit.

‘Negotiated Termination’

In a filing Wednesday, SunEdison said that before Vivint canceled the agreement, the two companies had been in discussions for a “negotiated termination” and that it can’t predict whether those talks will continue and possibly settle the dispute.

SunEdison liquidity has become increasingly murky in recent months. The company said Feb. 29 that an internal audit committee began an investigation into its financial condition late last year, partly in response to questions raised by current and former employees. Vishal Shah, an analyst at Deutsche Bank AG, said that may help limit any potential damages from the suit.

“Considering the audit committee investigation and resulting lack of financing availability, we believe the legal ramifications may not be that significant,” Shah wrote in a research note Tuesday. “We believe the termination of the agreement could be a longer-term positive for SunEdison.”

SunEdison fell 4 percent to $1.92 at the close in New York. Vivint gained 1.2 percent, after dropping 20 percent on Tuesday.

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