Investment community did not like this deal: Mercom's Prabhu on SunEdison’s failed Vivint deal


pv magazine: What do we know at this time?

Raj Prabhu: All we have as of this morning is Vivint’s press release saying that they are terminating this agreement because SunEdison did not fulfill its obligation. Beyond that, there are no other details as to what this means, nothing from SunEdison yet.

So it is good to wait and see how they respond and what the details are going to look like. Right now the market is speculating how this might turn out, and what are the terminating clauses, the fees that SunEdison has to pay Vivint, and so on and so forth.

That said, SunEdison’s stock price is up 16% within the first hour of trading. SunEdison as a company, and their trajectory, everything changed after they announced the Vivint acquisition. The market never liked it. They didn’t like that SunEdison all of a sudden went into the rooftop business.

And after that came the news that they are over-leveraged, with too much debt. Since then, SunEdison has been going back and basically terminating contract after contract for acquisitions they planned to make – mainly to preserve cash. So I would assume that the market is going to look at this in a positive way, only because this is what they wanted.

Greenlight Capital and Appaloosa also came out stating they did not like this transaction. Most of them wanted SunEdison to get out of it. That is how this is happening, one way or another. So I would think that in the end this will be a positive for SunEdison. And while they still have to work through their debt and a lot of other issues, the market might look at it as, SunEdison is working hard to try and set this ship right.

pv magazine: What does SunEdison look like without the Vivint deal?

Prabhu: Nothing changes – they are the same. They did not have Vivint anyway, and the deal never closed. So nothing changes significantly on their side. Again, we have to look at what are the implications, what do they have to pay based on their termination clause. Other than that they walked away from what the market saw as a bad deal.

Because they don’t acquire Vivint, their core business is still large-scale solar development.

pv magazine: Do you see SunEdison recovering now that the Vivint deal is gone?

Prabhu: It’s a good step, but they have been doing this for a while. They have gone back and terminated several other acquisition deals. This is a step in the right direction in terms of giving confidence to the investment community. I wouldn’t say that this will fix everything.

They still have to take care of their debt issues and the fact that they have so much. This might be a turning point in the sense that this is what the market wanted and this is what they got. That said, SunEdison, if you just look at their stock, it has been up and down, reacting to every news possible, so I wouldn’t say this fixes everything, but the market should like it.

pv magazine: Anything else?

Prabhu: At the moment, with the information that we have, that’s all we know right now. I think we should follow this news closely for the next few days as both parties come out and put out more news, and disclose what the details are and how this is going to turn out.

This is also a cautionary tale for companies, when you structure a merger and acquisitions deal, it needs to be airtight.