Business Context and Reporting Period
This Form 6-K filing by Teekay LNG Partners L.P. (the "Partnership") dated October 12, 2021, discloses the entry into a definitive Merger Agreement on October 4, 2021. The Partnership, a Marshall Islands limited partnership, has agreed to be acquired by Stonepeak Infrastructure Fund IV Cayman (AIV III) LP ("Parent") via a merger with a wholly-owned subsidiary of Parent. The filing details the transaction structure, consideration, and related agreements.
Key Financial Metrics and Transaction Terms
The filing focuses on the proposed acquisition terms rather than historical financial performance metrics such as revenue or cash flow for the period.
- Merger Consideration: $17.00 in cash per Common Unit.
- General Partner Interest Purchase: Parent will purchase 100% of the General Partner interests from Teekay Corporation for $26.4 million in cash.
- Services Companies Purchase: The Partnership's operating subsidiary will purchase restructured Services Companies for $3.34 million, subject to adjustments.
- Termination Fees:
- Partnership Termination Fee: $44.6 million (payable by Partnership to Parent under specified conditions).
- Parent Termination Fee: $89.1 million (payable by Parent to Partnership under specified conditions).
- Expense Reimbursement: Up to $10.0 million for Parent's out-of-pocket expenses upon certain terminations.
- Preferred Units: Series A (9.00%) and Series B (8.50%) Preferred Units will remain outstanding with no consideration delivered.
Material Changes and Transaction Structure
The primary material change is the proposed change of control. Upon closing, the Partnership will become a wholly-owned subsidiary of Parent. Key structural elements include:
- Teekay Corporation's Role: Teekay Corporation currently owns approximately 41.1% of the Common Units and 100% of the General Partner. Under the agreement, Parent will acquire all of Teekay's Common Units and the General Partner Interest.
- Voting and Support: Teekay and its subsidiaries have entered a Voting and Support Agreement to vote all held Common Units in favor of the Merger and against competing proposals.
- Restrictions: The Partnership is subject to customary "no-shop" restrictions, though exceptions exist for fiduciary duties and unsolicited superior proposals.
- Timing: The closing is not expected to occur prior to December 31, 2021, and must be consummated by June 30, 2022, or the agreement may be terminated.
Guidance, Outlook, Risks, and Contingencies
The filing contains no financial guidance or outlook for future earnings, as the focus is on the transaction. Management has unanimously recommended the Merger as fair and in the best interests of unitholders.
Conditions to Closing:
- Approval by a majority of Common Units at a special meeting.
- Receipt of regulatory approvals and third-party consents.
- Closing of the General Partner purchase and Services Companies purchase.
Risks and Contingencies:
- Non-Consummation: The Merger may not be completed due to failure to obtain approvals, regulatory requirements for divestitures, or termination rights exercised by either party.
- Operational Disruption: Risks include management distraction, difficulty retaining key personnel, and uncertainty affecting business operations.
- Competing Proposals: While restricted, the Partnership retains the right to terminate to accept a "Superior Proposal."
- Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from expectations due to various risks, including the COVID-19 pandemic.
Important Facts for Investor Verification
- Verify the date and outcome of the Special Meeting of Common Unitholders required to approve the Merger.
- Confirm the receipt of all necessary regulatory approvals and third-party consents.
- Monitor for any "Superior Proposals" that could trigger termination of the current agreement.
- Review the upcoming Proxy Statement for detailed information on the transaction, risks, and voting procedures.
- Note that the filing does not provide historical revenue, profit, or cash flow data; refer to the most recent Form 20-F for financial performance.