Appaloosa Sues to Block TerraForm Power Inc from Buying Vivint Solar Inc Assets

David Tepper’s Appaloosa Management filed a lawsuit to prevent a provision of the merger agreement between Sunedison and Vivint Solar, which involves TerraForm Power.

The hedge fund aims to stop TerraForm Power from purchasing the installed rooftop solar portfolio of Vivint Solar. The acquisition will take place once Sunedison completes its transaction with Vivint Solar.

Tepper’s hedge fund is asking the court for an “immediate injunctive relief” based on the fact that Sunedison and Vivint Solar could close the merger agreement anytime. Appaloosa owns 9.3% stake in TerraForm Power.

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Appaloosa repeatedly warned TerraForm

Appaloosa repeatedly warned the Board of Directors of TerraForm Power that the acquisition of the assets of Vivint Solar was not in the best interest of shareholders.

The hedge fund accused the yieldco of departing from its business model and making decisions without regard to its shareholders since it will be compelled to take $960 million in debt. It also alleged that Sunedison was imposing conflicts of interest on TerraForm Power. The hedge fund implied that the renewable energy development company was using the yieldco as a dumping site for bad acquisitions and subpar assets.

Appaloosa doubted TerraForm’s ability to exercise independent judgment

The hedge fund decided to file the complaint instead of asking TerraForm Power to do it because it was uncertain of the yield’s ability to “exercise independent judgment.”

In November, two of the independent directors of TerraForm Power resigned. The independent directors explained they were experiencing difficulty representing the interest of shareholders because of the actions of the Board.

Appaloosa requested TerraForm Power to allow it to inspect its books and review its transactions with Sunedision. The yieldco denied the hedge fund’s request.

“Although Appaloosa served a revised demand and was attempting in good faith to resolve the company’s objections, it has thus far been unable to do so,” according to the hedge fund in its filing.

Appaloosa named three directors of TerraForm Power as defendants in the lawsuit including Peter Blackmore, Jack Jenkins-Stark, and Christopher Compton.

The stock price of Sunedison declined more than 1% to $2.50 per share and TerraForm Power down by more than 2% to $9.43 per share at the time of this writing around 12:36 in the afternoon in New York.