Teekay Corporation has entered into an agreement to sell all of its remaining interests in Teekay Offshore Partners (TOP), including 49% general partner interest, common units, warrants, and an outstanding $25m loan from the company to TOP, to Brookfield Business Partners and its institutional partners for $100m in total.
The transaction is expected to be completed in May.
Brookfield Business Partners increased its shareholding in Teekay Offshore to 51% last year, and the acquisition will see the company take full control.
“The divestment of our remaining interests in Teekay Offshore is aligned with Teekay’s current strategy to simplify and focus on our core gas and tanker businesses,” commented Kenneth Hvid, Teekay’s president and chief executive officer.
“The proceeds from this transaction allow us to further strengthen Teekay Corporation’s balance sheet and credit profile, while significantly enhancing our near-term financial flexibility and range of options to address our near-term bond maturity,” Hvid added.
J Mintzmyer, lead researcher at Value Investor’s Edge, reckoned the deal is a clear case of a win-win arrangement.
“Teekay gets $100m in cash in exchange for disposing their weakest asset. Meanwhile, Brookfield solidifies control,” Mintzmyer said.
“Teekay is currently pricing $300m of secured debt. This transaction likely improves their hand and likely eliminates any fear of equity dilution. On one hand it’s unfortunate for Teekay to exit near the bottom of Teekay Offshore Partners equity pricing, but this has always been a troubled venture and they can now focus on crown jewel Teekay LNG,” added Mintzmyer.
Brookfield Business Partners is part of Brookfield Asset Management, which last month took a 62% stake in Oaktree Capital Management in a deal worth approximately $4.8bn.