Sunedison (NYSE:SUNE) had an incredible start to the week in the market this week, and for good reason. The company announced that it would be moving forward with the acquisition of Vivint Solar (NYSE:VSLR), and getting a much better deal than the original deal in the process. However, throughout the week we've seen declines as news has popped up with regard to the deal and a likelihood that it may not go through. So, the big question now is, “Will SUNE be able to buy VSLR?” Today, we'll talk about the hiccups in the plan and whether or not I believe the company will be able to get the acquisition closed.
David Tepper Tried But Couldn't Stop The Deal
The first issue that SUNE faced with regard to the Vivint Solar deal was David Tepper and his hedge fund Appaloosa Management. Tepper is a primary investor in TerraForm Power, Sunedison's yieldco. According to the deal, TerraForm (NASDAQ:GLBL) is purchasing a large amount of Vivint Solar's assets. Tepper believed that the deal may not be bad for SUNE itself, but would be absolutely horrible for TerraForm. So, he made the decision to take SUNE to court in an attempt to stop the deal. However, last week, a judge ruled that Tepper would not be able to stop the acquisition, and early this week, it was announced that the acquisition would be going through at a lower cost. However, Sunedison isn't quite out of the woods yet, there are more problems facing the prospect of the acquisition.
Tepper May Not Stop SUNE But Banks Might!
David Tepper may get what he wants after all. While his lawsuit proved not to be fruitful, there's another road block that SUNE is going to have to figure out its way around. That block is financing. You see, last year, when the acquisition was first announced, the company reached out to Goldman Sachs (NYSE:GS), Barclays (LON:BARC), Citibgroup, and UBS looking for loans that would ultimately fund the acquisition. At the time, the banks promised to fund the takeover. However, there's been quite a bit of bad news surrounding Sunedison since then, and banks are starting to get cold feet.
Recently, the banks involved in the financing of the deal have decided to postpone the financing agreement until SUNE releases its earnings report. The banks started to get cold feet when the company postponed the release of its earnings earlier in the week, and I have to assume that if the earnings aren't up to par, the banks aren't going to release he funds. Ultimately, the banks claim that because SUNE hasn't provided recent and updated financial statements, it has failed to fulfill a condition of the agreement.
Here's the big kicker. Under the acquisition agreement, the deal has to close before March 18th. If the acquisition isn't completed by March 18th, either company can back out of the agreement, and given recent updates with regard to SUNE, the reduced price on the deal and the fact that hundreds of millions of dollars due to VSLR as a result of the deal will be a loan in good faith, it is possible that Vivint will back out if the deal is not closed in time. So, SUNE needs to figure out how to get its financial statements out in time and get the funding it needs to close the deal yesterday!
Will The VSLR Deal Close?
Well, I would love to say that it's a sure bet, but that's simply not the case. However, I am leaning more toward the deal going through than the deal falling out. The reality is that at this point, SUNE has about 10 days to release updated financial data, which will give the company 5 days to secure funding. This is still well within the realm of possibility. Nonetheless, it's not going to be easy, and really anything can happen.
What We're Seeing In The Market Today
When it was announced that SUNE would indeed be acquiring VSLR, investors were filled with excitement. However, with the idea that banks may block the deal from happening, we're seeing a negative reaction in the market. Currently (11:37), Sunedison is trading at $1.54 per share after a loss of $0.25 per share or 13.97% so far today.
What We Can Expect To See Moving Forward
Moving forward, I have a relatively mixed opinion with regard to what we can expect to see from SUNE. Until the VSLR deal does actually make it through, chances are that we are going to see further declines on the stock. If the deal doesn't go through, those declines are likely to grow in a big way. However, I do have a bullish long term view of what we can expect to see. The reality is that the big concerns with regard to SUNE are debts. However, the company has the assets to get rid of the debts and then some. With the global changes in opinion with regard to how energy is generated, the solar and renewable energy industry as a whole is likely to climb in a big way over the next few years. Because SUNE is the largest in the solar sector, it only makes sense that they will take the lion's share of revenue as a result of the changes that are likely to take place in the energy industry. All in all, I'm still a bull.