The TerraForm Global Inc (NASDAQ:GLBL) board is being investigated by the Brodsky & Smith, LLC law firm on suspicion that it could have breached fiduciary duty with regards to the process that led the company being sold to Brookfield Asset Management Inc (NYSE:BAM). The board is also being investigated for potentially having breached state law with regards to the sale.
Fiduciary duty
In the deal, shareholders of TerraFrom will get $5.10 for every share of the company that they hold. Consequently, there are concerns that by the board breaching its fiduciary duty, it underpriced the value of TerraForm with the result being that Brookfield could be underpaying with shareholders of TerraForm ending up incurring a loss. Citing a share price of $13.66 that was recorded about 18 months ago, the law firm has called on the shareholders of TerraForm Global to come forward if they are interested in discussing the investigation’s legal ramifications.
In the TerraForm Global acquisition deal that was announced recently, Brookfield will pay a total of approximately $787 million for the company. The deal will also see Brookfield assume debt that TerraForm Global had taken up amounting to $455 million. Brookfield would also get to raise its shareholding in TerraForm Power to 51% at a price of $622 million. TerraForm Power is in possession of wind and solar assets with a power generation capacity of 2,967 megawatts in Chile, the United Kingdom, Canada and the United States.
Global presence
Currently, TerraForm Global has a presence in Uruguay, Malaysia, Thailand, South Africa, China, India and Brazil where it either owns or is in possession of contracts for the acquisition of solar and wind power generation capacity of 952 megawatts.
Brookfield, on the other hand, owns assets for renewable energy that have a capacity to generate 17,000 megawatts. At the conclusion of the deal, Brookfield will become the sponsor of TerraForm Power, edging out SunEdison which filed for bankruptcy in 2016 after it took on too much unsustainable debt to fund acquisitions.
On Tuesday shares of TerraForm Global Inc shot up by 15.88% to close the day at $4.93.
