Business Context and Reporting Period
This Form 6-K, dated November 26, 2021, serves as a supplement to the Proxy Statement for Teekay LNG Partners L.P. (the "Partnership"). The filing addresses a proposed acquisition by Stonepeak Limestone Holdings LP ("Parent") via a merger agreement entered into on October 4, 2021. The document provides supplemental disclosures necessitated by a lawsuit filed on November 18, 2021, alleging material omissions in the original Proxy Statement regarding the merger.
Key Financial Metrics and Projections
The filing does not report historical audited financial results for a specific period but provides unaudited management projections (2021–2030) used in the merger valuation. Key projected metrics include:
- Merger Consideration: $17.00 per Common Unit.
- 2021 Proportionate Economic Adjusted EBITDA: Revised upward to $709 million (from a prior projection of $704 million).
- 2021 Proportionate Economic Revenue: Projected at $1,018 million.
- 2021 Proportionate Economic Unlevered Free Cash Flow: Projected at $651 million.
- Valuation Analysis: A Discounted Cash Flow (DCF) analysis by Houlihan Lokey indicated an implied per unit value range of $13.25 to $20.18 (2021–2025 projections) and $14.05 to $19.96 (2021–2030 projections).
- Advisor Fees: Houlihan Lokey received a total of $1.25 million for its engagement by the Conflicts Committee.
Material Changes and Litigation
The primary material change disclosed is the filing of a lawsuit, Sams v. Teekay LNG Partners L.P., et al., in the U.S. District Court for the Southern District of New York. The plaintiff alleges violations of the Exchange Act due to alleged omissions in the Proxy Statement. Additionally, the Partnership received a demand letter from another unitholder with similar allegations. The Partnership denies all allegations but is providing supplemental disclosures to avoid potential expense and distraction. The filing also details the sale process, noting that 12 of 21 contacted bidders executed NDAs, and the GP Board determined a 100% sale transaction was in the best interest of the Partnership due to capital access needs and competitive landscape changes.
Guidance, Risks, and Management Commentary
Management Commentary: Management emphasizes that the projections are non-GAAP, unaudited, and not necessarily predictive of future results. The GP Board concluded that pursuing a 100% sale was necessary to access competitively priced capital for fleet renewal, which was unavailable in public equity markets since 2015.
Risks and Contingencies:
- Merger Delay or Failure: Litigation could prevent the merger from closing or delay it, potentially resulting in substantial costs and diversion of management resources.
- Conflicts of Interest: Some directors and officers of the General Partner have interests in Teekay Corporation, which may differ from Common Unitholders.
- Insurance Coverage: There is a risk that insurance providers may deny coverage for litigation costs.
- Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially from projections due to economic factors, regulatory approvals, and the uncertainty of the merger completion.
Investor Verification Checklist
- Verify the status of the pending lawsuit Sams v. Teekay LNG Partners L.P. and any potential injunctions against the merger.
- Review the full Proxy Statement (filed November 2, 2021) to understand the complete context of the supplemental disclosures.
- Confirm the final vote outcome of the Special Meeting of Common Unitholders scheduled for December 1, 2021.
- Assess the validity of the non-GAAP financial measures (e.g., Proportionate Economic Adjusted EBITDA) against GAAP standards.
- Monitor for any additional lawsuits or demand letters that may arise prior to the anticipated closing of the merger.