SunEdison's TerraForm Power opts for poison pill to fend off Brookfield

TerraForm Power has adopted a poison pill to block the accumulation of its shares by Brookfield Asset Management, following confirmation by SunEdison that it may sell its controlling Class B shares in both of its yieldcos.

Last month, Toronto-based Brookfield announced it had acquired 11.1 million of TerraForm Power's non-controlling Class A shares — equivalent to a 12% stake — making it the yieldco's largest shareholder.

Brookfield also has swap agreements in place that would allow it to buy a further 11.6 million Class A shares.

SunEdison, which is in the early stages of Chapter 11 bankruptcy, owns the controlling Class B shares of TerraForm Power and its sister yieldco, TerraForm Global.

Late last week, Brookfield and US hedge fund Appaloosa Management (TerraForm Power's third-largest shareholder, with a 9% stake) announced they would join forces to bid for SunEdison's stake in the yieldco.

But TerraForm Power's directors are not happy about that prospect.

On 25 July, the company revealed it has adopted a Stockholder Protection Rights Agreement — known as a poison pill — in response to Brookfield's plan.

The poison pill will be triggered if any company accumulates a 15% stake in TerraForm Power, which owns a 3GW portfolio of solar and wind assets in the US, Canada, the UK and Chile.

Peter Blackmore, TerraForm Power's chairman and chief executive, says the board believes it's best for acquisition proposals "to emerge in an environment free of a blocking position accumulated by possible bidders".

Separately on Monday, SunEdison confirmed it will be working "collaboratively" with its yieldcos "to explore value creation options" for its controlling Class B shares in both companies.

The potential sale of SunEdison's stakes "will be conducted through a jointly managed sales process and accompanying marketing protocol".

The yieldcos say the highest valuation may be achieved in a deal that includes both Class A and Class B shares.

SunEdison launched TerraForm Power in 2014 and TerraForm Global in 2015, with the intention of feeding them with projects from its huge global development machine.

Unlike SunEdison, TerraForm Power and Global have not filed for bankruptcy, and as of 25 July carried market capitalisations of $1.8bn and $675m, respectively.

Both yieldcos have seen their share prices rise by more than 40% since SunEdison declared bankruptcy in April.

TerraForm Global owns more than 800MW of renewables capacity across the developing world, mainly in China, Brazil and India.