(Reuters) - David Tepper-led hedge fund Appaloosa Management LP sued to prevent SunEdison Inc's SUNE.N yieldco from buying some of Vivint Solar Inc's VSLR.N assets after SunEdison acquires the rooftop panel installer.
The yieldco, TerraForm Power Inc TERP.O, is to acquire Vivint's residential solar rooftop portfolio for $799 million after SunEdison completes the Vivint transaction.
Appaloosa is seeking “immediate injunctive relief”, given that SunEdison’s acquisition of Vivint could close “at any time,” the hedge fund said in a filing in a Delaware court on Tuesday.
SunEdison declined to comment on the lawsuit.
SunEdison shares fell as much as 17 percent in morning trading on Wednesday, while Vivint shares declined as much as 5 percent. TerraForm Power shares rose as much as 4.5 percent, but gave up gains and turned slightly negative.
Appaloosa has repeatedly said TerraForm Power’s acquisition of Vivint’s assets - which had an initial purchase price of $922 million - was not in the interest of the yieldco’s shareholders, mainly because it would alter the company’s business model and force it to take on debt of $960 million.
Funds affiliated with Appaloosa owned 9.5 percent of TerraForm Power’s outstanding class A shares as of December.
SunEdison is already in talks to sell these assets to a third party, Avondale Partners analyst Michael Morosi said.
Appaloosa said it filed the lawsuit instead of asking TerraForm Power to do so because it doubted the yieldco’s ability to “exercise independent judgment.”
Two of TerraForm Power’s independent directors stepped down in November, saying the board’s actions were making it difficult for them to act in the interest of the shareholders.
Appaloosa had sought to inspect TerraForm Power’s books to study its dealings with SunEdison, but the yieldco had rejected the 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,” Appaloosa said in the filing.
The hedge fund named three TerraForm Power directors, Peter Blackmore, Jack Jenkins-Stark and Christopher Compton, as defendants in Tuesday’s lawsuit.
Buckling under pressure from Appaloosa, SunEdison cut the purchase price for Vivint’s portfolio in December.
SunEdison shares were down 5 percent at $2.86 in late morning trading, while TerraForm Power shares were down 1.6 percent at $9.52. Vivint shares were down 5 percent at $8.97.
Reporting by Amrutha Gayathri and Sneha Banerjee in Bengaluru; Editing by Kirti Pandey
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