New York-headquartered investment firm Stonepeak has reached an agreement to acquire Teekay LNG Partners for an enterprise value of $6.2bn.
The deal will see investment vehicles managed by Stonepeak acquire all the issued and outstanding common units in Teekay LNG, including around 36m common units owned by Teekay, and 100% of Teekay’s ownership in Teekay LNG’s general partner, Teekay GP, which has an economic ownership interest of some 1.6m Teekay LNG common units, for $17 per common unit or common unit equivalent in cash. It also includes consolidated and proportionate joint venture net debt, and $1.5bn in common unit equity value.
The transaction has been approved by the board of directors of Teekay GP and Teekay, including the unanimous approval of the conflicts committee of Teekay GP, and is targeted to close by the end of 2021. The transaction remains subject to approval by a majority of Teekay LNG’s common unitholders. 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.
Promptly after the completion of the transaction, the common units of Teekay LNG will be delisted from the New York Stock Exchange (NYSE). The series A and B preferred units of Teekay LNG are expected to remain outstanding and continue to trade on the NYSE following the completion of the transaction.
“This is a transformative transaction for Teekay LNG that will enable existing unitholders to realise an attractive valuation and immediate liquidity on closing,” commented Mark Kremin, president and CEO of Teekay Gas Group. “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.”
“Stonepeak has long recognised 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,” said James Wyper, senior managing director at Stonepeak. “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.”
Since the initial public offering in 2005, Teekay has built Teekay LNG into the world’s third-largest independent LNG carrier owner and operator.
J Mintzmyer, a maritime equity researcher and the founder of Value Investor’s Edge, said he believed the $17 takeover is a bit weaker than expected. “Our ‘fair value estimate’ was $20.00, but this is indicative of the cheap valuations across the entire MLP sector.”
“More importantly, this is the fourth major transaction in the LNG sector over the past year after both GasLog and Hoegh LNG went private with Blackrock and Morgan Stanley respectively while Golar divested HYGO and Golar Partners to New Fortress. This leaves Golar LNG, which we are long, as the only major remaining LNG shipping and infrastructure firm on the public markets.”