IPPToday #153: TerraForm offers to acquire Saeta Yield for US$1.2 billion
- TerraForm Power
- Saeta Yield SA
- Brookfield Asset Management Inc
Related M&A Transactions
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TerraForm Power, Inc. has announced that it has launched a voluntary tender offer to acquire 100% of the outstanding shares of Saeta Yield, S.A., a leading, publicly-listed European owner and operator of wind and solar assets, located primarily in Spain. The transaction has been approved by the Board of Directors of TerraForm Power.
TerraForm Power has offered EUR12.20 (US$15.04) in cash per share of Saeta and has secured irrevocable commitments from shareholders, who together own more than a 50% interest, to tender their shares. The aggregate value of the irrevocable commitments is approximately US$600 million.
If TerraForm Power successfully acquires all of the remaining Saeta shares in the tender offer, the total purchase price will be approximately US$1.2 billion. Assuming that purchase price, TerraForm Power intends to execute a funding plan comprised of the following sources:
- A US$400 million equity offering, which Brookfield has agreed to backstop in order to provide a minimum issuance price equal to TerraForm Power’s 5-day VWAP immediately prior to announcement of the transaction.
- The remaining US$800 million will be financed with available liquidity, which TerraForm Power intends to refinance with a combination of project financings of its unencumbered assets and cash to be released from Saeta’s assets.
The tender offer is expected to be completed in the second quarter of 2018, subject to certain closing conditions including obtaining regulatory approvals. TerraForm Power will be able to acquire 100% of the shares of Saeta provided that at least 90% of the shares are tendered in the offer.
John Stinebaugh, Chief Executive Officer of TerraForm Power, said:
“With the Saeta acquisition, we are excited to significantly grow our portfolio of high-quality wind and solar assets and expand our geographic footprint with a scale position in Western Europe. With Brookfield as our sponsor, we believe this transaction demonstrates our ability to originate acquisitions of high-quality assets on a value basis that are highly accretive to our shareholders.”
Saeta’s portfolio is comprised of 100% owned, recently constructed assets primarily in Western Europe, including 778 MW of onshore wind and 250 MW of concentrated solar, with an average age of six years and a remaining useful life in excess of 25 years.
The acquisition is highly accretive to TerraForm Power, with CAFD accretion of 24% on a pro forma basis and returns on equity in excess of TerraForm Power’s target.
Due to the accretion of the transaction, TerraForm Power has increased its dividend to US$0.76 per share (on an annual basis), a 6% increase over its previous target of US$0.72 per share, meeting its dividend growth target of 5-8% per annum.
The acquisition also furthers TerraForm Power’s long-term plan to establish an investment grade balance sheet and accelerates deleveraging of its corporate debt to cash flow ratio.