Investment Firm to Acquire Teekay LNG in $6.2 Billion Deal

Teekay LNG Partners (NYSE:TGP), the LNG shipping arm of Teekay Corporation (NYSE: TK), has announced an agreement to to be acquired by investment firm Stonepeak in a deal valued at $6.2 billion.

The two parties on Monday announced they have entered into an agreement and plan of merger under which investment vehicles managed by Stonepeak “will acquire (a) all the issued and outstanding common units representing limited partner units in Teekay LNG, including approximately 36.0 million common units owned by Teekay Corporation (Teekay) (NYSE:TK), and (b) 100 percent of Teekay’s ownership in Teekay LNG’s general partner, Teekay GP L.L.C. (Teekay GP).”

Teekay LNG is one of the world’s largest independent owners and operators of LNG carriers and has full or partial ownership interests in 47 LNG carriers, 21 mid-size LPG carriers, and seven multi-gas carriers. The company also Teekay LNG owns a 30 percent interest in an LNG regasification terminal.

The agreement “includes an economic ownership interest equivalent to approximately 1.6 million Teekay LNG common units, for $17.00 per common unit or common unit equivalent in cash (collectively, the Transaction), representing an enterprise value of $6.2 billion, including consolidated and proportionate joint venture net debt, and $1.5 billion in common unit equity value.”

The $17.00 per unit acquisition price represents a premium of 8.3 percent to the closing price of Teekay LNG’s common units on October 1, 2021 and premiums of 12.3 percent and 17.5 percent to the volume-weighted average price of Teekay LNG’s common units over the last 60 and 180 days, respectively, the companies said.

Teekay said the transaction is the result of a review by Teekay GP’s Board of Directors, as well as advised by Conflicts Committee of Teekay GP which determined it to be in the best interests of Teekay LNG and its unitholders.

“Subsequently, acting upon the recommendation of the Conflicts Committee, the Board of Directors of Teekay GP unanimously approved the Transaction and recommended that all Teekay LNG’s common unitholders vote in favor of the Merger Agreement on the terms presented,” Teekay LNG said in a statement.

Closing of the deal is expected by the end of the year. The transaction is also subject to approval by a majority of Teekay LNG’s common unitholder and certain customary closing conditions.

“This is a transformative transaction for Teekay LNG that will enable existing unitholders to realize an attractive valuation and immediate liquidity on closing,” said Mark Kremin, President and CEO of Teekay Gas Group Ltd. “Under Stonepeak’s ownership, we expect Teekay LNG to have improved access to competitively priced capital for both fleet renewal and potential future growth in the next phase of our development, which has not been available through the public equity capital markets for many years. We are excited to partner with Stonepeak and look forward to continuing to build our leading market positions, while maintaining our strong focus on operational excellence. We believe that the combination of our existing management and operations teams with Stonepeak, which has a long track record for investing in energy infrastructure, will provide substantial benefits to our customers, employees, joint venture partners and capital providers in the future.”

James Wyper, Senior Managing Director at Stonepeak, said the investment firm “has long recognized the growing global demand for LNG and importance of natural gas as a bridge fuel, particularly as the world continues to shift toward cleaner sources of energy,”

“Through this transaction, we have an exciting opportunity to invest in a critical energy transition infrastructure business in the form of Teekay LNG’s high-quality, modern fleet of vessels and stable long-term customer contracts,” said Wyper. “We are particularly excited to partner with Teekay LNG’s best-in-class management team to bring cheaper, cleaner, more reliable energy supply to all parts of the world, especially in Asia where we have been active investors in the ongoing shift to cleaner fuels and renewables.”

“Since the initial public offering in 2005, Teekay has built Teekay LNG into the world’s third largest independent LNG carrier owner and operator, with one of the biggest and most diversified portfolios of long-term contracts with leading players in the LNG industry,” commented Kenneth Hvid, Teekay’s President and CEO. “We believe this Transaction represents a unique opportunity to monetize our position in Teekay LNG while realizing an attractive return on investment for Teekay and for Teekay LNG common unitholders. This Transaction also provides Teekay with greater financial flexibility to leverage its existing operating franchise and industry-leading capabilities to pursue attractive investment opportunities in both the shipping sector and potentially in new and adjacent markets, which we expect to be dynamic as the world pushes for greater energy diversification.”

Teekay, which currently owns approximately 41 percent of Teekay LNG’s outstanding common units, has entered into a Voting and Support Agreement to vote in favor of the merger.

As part of the Transaction, Teekay will transfer to Teekay LNG the ownership of the management services companies that currently deliver the operations for Teekay LNG and certain of its joint ventures under existing management services contracts.

Following the completion of the transaction, the common units of Teekay LNG will be delisted from the New York Stock Exchange.

Stonepeak specializes in infrastructure and real assets with approximately $39 billion of assets under management