This post has been updated at 2:22 p.m. EST to include analyst commentary, market movement, and additional details.
David Tepper of Appaloosa Management welcomed the end of the merger of Vivint Solar (VLSR) with SunEdison (SUNE), just as the latter's shares surged as high as 24% in Tuesday's trading.
"SunEdison's failure to consummate the merger when required pursuant to the terms of the merger agreement constitutes a willful breach of the merger agreement, and Vivint Solar intends to seek all legal remedies available to it in respect of such willful breach," Vivint said in Tuesday's statement.
In a note released on Tuesday morning, Jeffrey Osborne of Cowen & Co. said that he expected that the ultimate settlement SunEdison would have to pay to Vivint may be "well above" the $34 million breakup fee though quantifying the amount was difficult.
"We believe Vivint will point to lost market cap since the July 2015 announcement; however, the peer group has compressed sharply since that period and the company appears to have lost market share during this period," Osborne added.
Representatives from SunEdison did not immediately respond to requests to comment.
The Deal: Vivint Terminates Purchase by SunEdison
Shares of Vivint fell as much as 22% in Tuesday's trading.
However, there was one other beneficiary of the news: SunEdison's yieldco TerraForm Power (TERP), which was trading as much as 10% higher early on Tuesday.
"This is a good result for TerraForm Power," Tepper said in a phone interview with Real Money on Tuesday.
Appaloosa filed suit against SunEdison in January, in an effort to block the Vivint deal from going through. The deal, which was worth $2.2 billion when announced in July, would have required TerraForm Power to acquire Vivint Solar's portfolio of residential solar projects, which were considered to be less creditworthy than TerraForm Power's usual portfolio of commercial projects.
Last month, a Delaware court denied a preliminary injunction order on the proposed transaction but left open the possibility of going to trial. In his ruling, Judge Andre Bouchard questioned the fairness of the transaction as well as broader concerns over SunEdison's control over TerraForm Power, which were discussed in Appaloosa's filing.
In November, TerraForm Power announced several changes to its board and management structure following a meeting of its board. Brian Wuebbals, who had served -- and continues to serve -- as SunEdison's CFO, was named CEO of TerraForm Power. Peter Blackmore resigned from SunEdison's board and assumed the role of chairman of TerraForm Power's board as well as chairman of the company's corporate governance and conflicts committee.
"It is quite reasonable to think that a nine-year director would have difficulty becoming an adversary to SunEdison and its stockholders over the course of a single day," Judge Bouchard said in his ruling, referring to Blackmore.
The November board meeting saw the resignation of five board members; Alejandro Hernandez and Steven Tesoriere resigned after Wuebbals was appointed CEO of SunEdison. The remaining three board members, Francisco Perez Gundin, Mark Florian and Mark Lerdal, resigned at the conclusion of the meeting due to their disagreements with the changes to TerraForm Power's board and management structure, according to a filing SunEdison posted with the Securities and Exchange Commission.
Although Gundin resigned from TerraForm Power's board, he continued serving as COO of SunEdison until Jan. 14, 2016, according to the filing.
Earlier this month, SunEdison said in another filing with the SEC that it was unable to release its 2015 financial results on time due in part to an internal investigation, which was launched late in 2015, tied to allegations former executives at SunEdison made about the company's financial position. So far, the audit committee conducting the investigation has found no wrongdoing based on the allegations. SunEdison declined to comment further on the investigation.
The Vivint deal may be dead, but the SunEdison saga may not be over yet. Investors should stay tuned.
