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TICKERS: TOO

Teekay Offshore Shares Spike 30% Higher on Brookfield Merger Agreement

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Teekay Offshore Partners shares are trading more than 30% higher today on news that Brookfield Business Partners will be purchasing all un-owned common units of the firm for $1.55 per share.

This morning Hamilton, Bermuda based Teekay Offshore Partners L.P. (TOO:NYSE) announced that it has entered into an agreement and plan of merger with Brookfield Business Partners L.P. (BBU:NYSE) and certain of its affiliates and institutional partners (the "Consortium"). According to the merger agreement, the Brookfield Consortium will acquire by merger all of the outstanding publicly held common units representing limited partner interests of the Partnership not already held by the Brookfield Consortium in exchange for $1.55 in cash per common unit. The cash consideration represents an increase of $0.39 (33.6%) to the $1.16 closing price per common unit on September 30, 2019. As an alternative to receiving the cash consideration, each unaffiliated unitholder will have the option to elect to receive one newly designated unlisted Class A Common Unit of the Partnership per common unit, but those units will have limited voting rights and limited transferability.

The merger is expected to close in Q4/19 subject to satisfaction of certain customary conditions. Upon the closing of the merger, the common units will cease to be publicly traded. The Partnership will continue to file certain reports with the Securities and Exchange Commission following the closing of the merger.

Teekay Offshore explains that it will deliver election materials to the unaffiliated unitholders that will include a description of the terms of the Class A Common Units and instructions for electing to receive the equity consideration. Unitholders who do not elect to receive the equity consideration prior to the election date set forth in the election materials will receive the cash consideration. Pursuant to the terms of the Merger Agreement, the Partnership's outstanding preferred units will be unchanged and remain outstanding by virtue of the merger.

The conflicts committee, composed of non-executive, independent directors of the board of directors of the Partnership's general partner unanimously approved the Merger Agreement and determined that the transaction contemplated thereby was advisable and in the best interests of the Partnership and the unaffiliated unitholders. The members of the Board have unanimously approved the Merger Agreement on the recommendation of the Conflicts Committee. Neither the Conflicts Committee nor the Board are "making any recommendation whether an unaffiliated unitholder should elect the unit option nor did they evaluate the terms of the equity consideration in determining whether to approve the Merger Consideration," the company noted.

Teekay Offshore advises that it is a "leading international midstream services provider to the offshore oil production industry, primarily focused on the ownership and operation of critical infrastructure assets in offshore oil regions of the North Sea, Brazil and the East Coast of Canada. Teekay has consolidated assets of approximately $5.2 billion, comprised of 58 offshore assets, including floating production, storage and offloading units, shuttle tankers, floating storage and offtake units, long-distance towing and offshore installation vessels, and a unit for maintenance and safety."

Brookfield Business Partners lists that it is a business services and industrials company focused on owning and operating high-quality businesses that benefit from barriers to entry and/or low production costs. The firm provides business services including construction management and contracting services; residential real estate, logistics and financial services; energy operations including oil and gas production; and industrial operations which include select manufacturing and mining operations. The firm states that it is the flagship listed business services and industrials company of Brookfield Asset Management Inc. (BAM:NYSE; BAM.A:TSX), which it indicates is a leading global alternative asset manager with more than $385 billion of assets under management.

Teekay Offshore Partners began the day with a market capitalization of about $476.4 million. The company has 410.7 million common shares (units) outstanding. The stock has a 52-week price range of $1.03-2.45/share. This morning, TOO shares opened at $1.54 (+$0.38, +32.76%) over yesterday's $1.16 closing price. The stock has traded today between $1.53 and $1.54/share on very high volume and presently is trading at $1.53 ((+0.38, 33.04%).

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