This Leading Global Asset Manager Will Acquire TerraForm Global (GLBL)

TerraForm Global Inc. (NASDAQ: GLBL) shares were up over 15% on Tuesday, March 7, 2017, on abnormal trading volume. The stock has been outperforming the market and was up nearly 25% YTD. Moreover, GLBL was up and 24.68% over the past quarter. Traders exchanged over 17M shares on Tuesday, while the average daily trading volume was 1.11M shares.

Here’s a quick look at TerrForm Global’s stock performance:

TerraForm Global

Source: TradingView

After TerraForm Global, a global owner and operator of clean energy power plants, agreed to be acquired by Brookfield Asset Management (NYSE: BAM), GLBL gapped up between March 6, 2017 and March 7, 2017.

Brookfield to Purchase TerraForm Global and Power for $787M

Brookfield Asset Management agreed to acquire TerraForm Power (NASDAQ: TERP) and TerraForm Global, and consequently it would have a 51% ownership in TERP. Terraform Power shareholders would receive $11.46 per share plus any additional cash or shares post-closing, which is subject to proration. Moreover, Brookfield would provide a $500M sponsor equity line in support of the company’s future growth. That said, TERP would be still listed on the Nasdaq.

Additionally, BAM will acquire TerraForm Global for approximately $787M in cash. Moreover, it would assume over $450M in net debt, representing an enterprise value of over $1B.

Acquisition Details

Now, under the terms of the agreement, BAM will purchase all of the outstanding TerraForm Global Class A shares for $5.10 per share in cash. This represented a premium of around 50% to GLBL’s closing share price on Sept. 16, 2016. Immediately before the merger, pursuant to a settlement agreement, SunEdison will exchange all its Class B shares and Terraform Global Class B shares into 25% of outstanding class A shares, on a fully diluted basis.

According to Chairman and Interim Chief Executive Office of TerraForm Global, Peter Blackmore, “We are pleased to have reached a successful completion of TerraForm Global’s strategic alternatives process to maximize value for our shareholders...After a thorough review of alternatives and the significant steps taken by the Board and management to best position TerraForm Global for success, we are confident a sale to Brookfield is the best possible transaction for our shareholders. We look forward to working closely with Brookfield’s experienced team to achieve a timely closing and a seamless transition.”

Chief Executive Officer and Chief Restructuring Officer of SunEdison, John Dubel, stated, “SunEdison is supportive of this transaction which we believe maximizes value for the estate and the independent shareholders of TerraForm Global.”

The transaction is expected to completed during the second half of 2017, and is subject to certain closing conditions. This includes:

  • Shareholder approval by the majority of Class A shareholders (excluding SunEdison and Brookfield)
  • Regulatory approvals
  • The resolution of certain litigation against TerraForm Global
  • Certain approvals from the U.S. bankruptcy court overseeing the SunEdison Chapter 11 bankruptcy case, including the Court’s approval of the settlement agreement between TerraForm Global and SunEdison
  • Court’s approval of SunEdison’s vote in favor of the Brookfield transaction.

TerraForm Global Recent 3QFY16 Results

On Feb. 21, 2017, TerraForm Global reported its third quarter 2016 financial results and filed its Form 10-Q.

According to Peter Blackmore, “The reporting of our third quarter 2016 results demonstrates TerraForm Global’s continued progress in positioning the Company for success…The Board and management team are committed to strengthening operations and maximizing value for shareholders.”

Here’s a look at what TerraForm Global included in its 3QFY2016 press release:

TerraForm Global Results

Source: TerraForm Global

Notes on Income Statement

Here are the notes included with the table above, which presents a reconciliation of net loss to Adjusted EBITDA to Cash Available for Distribution (CAFD):

  • a) In conjunction with the closing of the IPO in August 5, 2015, we entered into the MSA with SunEdison, pursuant to which SunEdison agreed to provide or arrange for other service providers to provide management and administrative services to us.No cash consideration was paid to SunEdison for these services for the quarter ended December 31, 2015 and amount of general and administrative expense-affiliate in excess of the fees paid to SunEdison is treated as an addback in the reconciliation of net income (loss) to Adjusted EBITDA.In addition, non-operating items and other items incurred directly by TerraForm Global that we do not consider indicative of our core business operations will be treated as an addback in the reconciliation of net income (loss) to Adjusted EBITDA.The Company’s normal operating general and administrative expenses of $5.4M for the 3 months ended September 30, 2016, not paid by SunEdison, are not added back in the reconciliation of net income (loss) to Adjusted EBITDA.
  • b) Represents transaction related costs, including affiliate acquisition costs, associated with the acquisitions completed during 9 months ended September 30, 2016 since such costs are considered to be paid for with financing sources. Additionally, includes formation and offering related fees and expenses and Formation and offering related fees and expenses – affiliate reflected in the consolidated statement of operations. These fees consist of professional fees for legal, tax, and accounting services related to our IPO.
  • c) Includes settled and unsettled gains and losses on foreign currency hedges related to operating and investing activities.  The net loss relates primarily to losses on foreign currency hedges of certain planned acquisitions, and is partially offset by gains on foreign currency hedges associated with operations.
  • d) Net change in restricted cash excludes impact of any foreign currency appreciation or depreciation during the period from 2Q 2016 and 3Q 2016.

The Bottom Line

TerraForm Global entered into a definitive merger agreement with Brookfield Asset Management. Brookfield Asset Management will acquire TerraForm Global for over $750M and assume its $455M in net debt. Moreover, BAM will purchase a majority stake in TerraForm Power.

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