Vivint calls off SunEdison merger

Lehi-based residential solar developer Vivint announced last week that it had cancelled its sale to Sun Edison, saying SunEdison was not fulfilling the terms of the agreement. According to news reports, the deal fell apart because of SunEdison’s troubled financial position after a year-long acquisition binge that included billions in solar and wind deals.

Lehi-based residential solar developer Vivint announced last week that it had cancelled its sale to Sun Edison, saying SunEdison was not fulfilling the terms of the agreement. According to news reports, the deal fell apart because of SunEdison’s troubled financial position after a year-long acquisition binge that included billions in solar and wind deals.

The sale was set to close by the end of February and Vivint said SunEdison was in breach of their agreement because it wasn’t ready to close the deal as prescribed. Vivint said it plans to seek legal remedies. SunEdison agreed to buy Vivint in July in a deal setting the value at $2.2 billion.

Vivint also agreed to sell its rooftop solar service assets to TerraForm Power, which owns and runs SunEdison’s power plants, for $922 million. In December the companies rewrote the agreement. Under the new deal, Vivint shareholders would get less cash and a bit more stock and Blackstone, Vivint’s controlling shareholder, would invest in the company and offer $250 million in credit to Vivint. The price of the TerraForm Power part of the deal was also reduced.

Vivint Solar stock fell more than 10 percent when the cancellation was announced last week while Sun Edison stock jumped as much as 20 percent during the week, mainly because investors were relieved that the financial burden of the merger was no longer hanging over the company. Vivint’s termination of the merger frees up SunEdison cash for other purposes. However, Vivint’s decision to terminate the deal opens a new prospective legal and financial headache for SunEdison.

Through the course of the merger’s closing preparations, it became increasingly clear SunEdison was unable to pay for Vivint, even after revising the terms of rooftop assets deal with Terra Form. SunEdison was relying on $300 million in credit from a consortium of banks to close its end of the Vivint deal. However, the banks cancelled the credit because SunEdison did not meet requirements for its funding commitment. Without financing in place, SunEdison said it wouldn’t be able to close for “the foreseeable future.”

“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 a press release. 

Late last week, Vivint confirmed that it had, indeed, filed suit against SunEdison with the Delaware Court of Chancery, alleging willful breach of the merger agreement between the companies. Vivint argues in the filing that SunEdison likely had buyer's remorse almost immediately following the announcement of the initial merger agreement back in July and thus has since not performed its duties in completing the merger. While Vivint worked diligently to fulfill its obligations and was ready to consummate the merger, SunEdison willfully breached its obligations to obtain the necessary financing for the deal, the suit claims. The original merger agreement made no mention of SunEdison’s ability to get financing, thus strengthening Vivint’s case.