Amid the volatility of the financial markets on Tuesday, two billion-dollar deals were announced that involved three different Texas law firms. One deal is more certain, the other not so much.
The more certain one centers around San Jose, Calif.-based solar power plant developer 8point3 Energy Partners, which said after the markets closed Monday that it agreed to be purchased by Swiss asset management firm Capital Dynamics in a deal valued at almost $1 billion.
The less certain one involves Midstates Petroleum, which said Tuesday it has approached SandRidge Energy about an all stock merger that would create a $1 billion company and the top player in the Mississippian Lime formation of northern Oklahoma and southern Kansas. SandRidge hasn’t commented on the proposal.
Bracewell is assisting Evercore, which is providing financial advice to the conflicts committee of 8point3’s general partner. That team included partner Will Anderson and associates Ben Martin and Andy Monk, all of Houston.
Evercore has called on Anderson to advise it on many advisory assignments, including matters involving Hi-Crush, Memorial Production Partners, Targa Resources and Summit Midstream. Anderson also has worked on deals for Holly Energy Partners, Western Refining Logistics, Merchants’ Choice Payment Solutions and VTTI Energy Partners.
Other financial advisers on the deal include Goldman Sachs for SunPower and BofA Merrill Lynch for First Solar.
Meanwhile, Skadden, Arps, Slate, Meagher & Flom is counseling another 8point3 investor, First Solar. The Skadden team was mostly in the firm’s Washington, D.C. office but included energy and infrastructure projects partner Ethan Schultz, who has an office in Houston as well, and energy and infrastructure associate Mark Schlackman, who is in Houston.
On the Midstates deal, sources say Vinson & Elkins partners Steve Gill and Mark Kelly are advising Oklahoma City-based SandRidge on its options. Kelly is also the firm’s chairman.
It makes sense. The two assisted SandRidge on its planned $746 million purchase of Bonanza Creek, which had to be scrapped after activist investor Carl Icahn came out against it.
SandRidge general counsel Phil Warman is a former corporate finance partner at V&E.
Paul, Weiss, Rifkind, Wharton & Garrison is counseling Tulsa-based Midstates, whose general counsel is Scott Weatherholt.
The 8point3 deal, the result of a strategic review by its sponsors, includes $12.35 per unit in cash. The transactions represent about $977 million in equity value and about $1.7 billion in enterprise value.
Investors weren’t so keen on the deal, sending 8point3’s units down by 11.5 percent on Tuesday. The reason? The $977 million offer came in at 11 percent less than its market value the previous day. The per-unit price was also 17 percent below the 50-day moving average of $14.93, Williams Capital analyst Cynthia Motz wrote in a report Tuesday.
“While the deal price looks low, particularly given 8point3’s continually exceeding its metrics, it may not be a reflection of 8point3’s potential but the perfect storm of higher interest rates, greater volatility, SPWR’s [SunPower] needing cash and FSLR’s [First Solar’s] desire to move on.”
Raymond James analyst Pavel Molchanov was a little more blunt. “We will not sugarcoat it: we are disappointed,” he said in a note. “While we are reluctant to downgrade 8point3 at these levels, the odds of a competing proposal emerging seem very low after a process as exhaustive as this one (130 parties contacted).”
The deal is expected to close in the second or third quarter if it clears 8point3 shareholders, Hart-Scott-Rodino and the Federal Energy Regulatory Commission. It also has to clear the Committee on Foreign Investment in the U.S. given that the buyer’s headquarters is in Switzerland.
First Solar and SunPower formed 8Point3 as a so-called “yieldco” in 2015 to buy solar farms that they developed. But it suffered as solar power prices slid and it couldn’t acquire projects that met its “return threshold,” 8point3 CEO Chuck Boynton said on a conference call with analysts and investors.