By Amrutha Gayathri
(Reuters) - Solar panel installer Vivint Solar Inc said on Tuesday it had terminated an agreement under which it would have been taken over by solar energy company SunEdison Inc after SunEdison failed to "consummate" the deal.
The cash-and-stock deal, worth $2.2 billion when it was forged last July, had faced criticism from hedge funds and other investors as SunEdison's finances and share price weakened.
SunEdison's stock rose as much as 33 percent to $2.53, while Vivint's fell as much as 22.6 percent to a record low of $4.03.
Vivint said it would "seek all legal remedies available" as a result of SunEdison's "willful breach" of the merger agreement.
Vivint, controlled by Blackstone (NYSE:BX) Group LP, did not provide details on why it scrapped the deal and SunEdison did not respond to requests for comment.
Like other solar companies, SunEdison has been hit by the drop in oil prices but it has also faced criticism for trying to grow too quickly through acquisitions that it could not afford.
The company, which has a market value of about $650 million, had long-term debt of $9.77 billion as of Sept. 30.
SunEdison said on March 1 it would delay filing its annual report while an internal investigation was conducted into its financial position.
"SunEdison's borrowing constraints made it impossible for the company to complete the acquisition of Vivint," Raymond James analyst Pavel Molchanov told Reuters.
The deal was set to expire on March 18, Cowen & Co analysts said in a note, adding that SunEdison could be liable for an amount "well above" the breakup fee of $34 million following a court hearing or likely settlement.
Several analysts said both companies will be better off on their own, noting that the extension of U.S. solar investment tax credits beyond 2016 had breathed new life into the industry.
As part of the deal, SunEdison "yieldco" TerraForm Power Inc had agreed to buy Vivint's rooftop solar portfolio for $799 million, revised down from $922 million under pressure from activist hedge fund Appaloosa Management.
"It's good for TerraForm," Appaloosa Chief Executive David Tepper said of the collapse of the deal. TerraForm's shares were up 5.4 percent at $10.77 in early afternoon trading.
Appaloosa had said the deal put TerraForm shareholders at risk and was a departure from its business model.
David Einhorn's Greenlight Capital said in January it was in talks with SunEdison regarding a board seat and that it was pressing for asset sales or even the sale of the company itself.
Up to Monday's close, SunEdison's stock had lost 94 percent of its value since the Vivint deal was announced, while Vivint's stock had fallen 52 percent.