Tepper Legal Fight on $1.9 Billion SunEdison Deal Comes to Close

  • Appaloosa and SunEdison yieldco TerraForm Power settle lawsuit
  • TerraForm to add additional independent director to board

Billionaire David Tepper effectively won his legal battle over SunEdison Inc.’s proposed acquisition of rooftop solar installer Vivint Solar Inc. in March, when the $1.9 billion deal collapsed. The fight didn’t end until Tuesday.

That’s when Tepper’s Appaloosa Management LP agreed to a settlement that resolved the suit, wrangling key concessions addressing the relationship between SunEdison, the bankrupt clean-energy giant, and one of the yieldcos it founded and controls, TerraForm Power Inc.

Appaloosa is TerraForm’s third-biggest shareholder and had strongly opposed the Vivint deal because it called for the yieldco to pay about $800 million for some of Vivint’s assets. Appaloosa filed the suit in January, raising questions about TerraForm’s independence and contending the acquisition would be better for SunEdison than its yieldco.

As part of the settlement in Delaware Chancery Court, TerraForm agreed to segregate its information technology systems from SunEdison’s and plans to appoint an additional independent director to its board, according to a statement Tuesday. The yieldco also said it would grant TerraForm Chief Operating Officer Thomas Studebaker -- or a successor in that role -- responsibility for “ordinary course commercial operations,” subject to the authority of interim Chief Executive Officer Peter Blackmore.

Untangling Companies

The moves show TerraForm taking steps to untangle itself from its parent. The yieldco and its sister company TerraForm Global Inc. both said this month they are seeking to sell themselves as SunEdison continues to sell off assets.

“It seems like one step in a number of steps that shows the board of TerraForm Power preparing for a possible bidding process,” Greg Jones, an analyst at CreditSights Inc., said in an interview Wednesday.

Swami Venkataraman, an analyst at Moody’s Investors Service, agreed. “The point of this settlement at this point is to remove the overhang for the auction,” he said in an e-mail. Having its own technology systems “would certainly make TerraForm more independent of SunEdison.”  

Under the terms of the settlement, Tepper will receive $3 million to cover legal fees, according to court filings. Appaloosa owned 8.7 million shares of Bethesda, Maryland-based TerraForm as of July 22, a 9.5 percent stake, according to data compiled by Bloomberg.

In July, Appaloosa and Brookfield Asset Management Inc. said that they’re planning a joint bid for SunEdison’s stake in TerraForm. Tepper declined to comment.

‘Independent TerraForm’

“There’s good value in an independent TerraForm,” Tepper said in March.

TerraForm also agreed to segregate its accounting and human resource systems.

The yieldco hasn’t been able to file a financial report since the third quarter of last year; it has relied on SunEdison, which also hasn’t filed financial results since November.

TerraForm slipped 0.1 percent to $14.01 at the close in New York. It’s gained more than 11 percent this year.

Delaware Chancery Court Judge Andre Bouchard must approve the settlement before it becomes final.

The case is Appaloosa Investment Limited Partnership I v. SunEdison Inc., CA No. 11898, Delaware Chancery Court (Wilmington).

Before it's here, it's on the Bloomberg Terminal.