Brookfield Business Partners, together with its institutional partners, has entered into an agreement to acquire 60 percent of Teekay Offshore Partners, a provider of marine services and solutions to the offshore oil industry.
Brookfield Business Partners describes itself as a business services and industrial company focused on owning and operating high-quality businesses within Brookfield’s private equity group.
It is a part of Brookfield Asset Management, a global alternative asset manager with approximately $250 billion of assets under management.
According to Brookfield’s statement on Wednesday, the total investment as part of the Teekay Offshore deal is expected to be around $750 million which will be funded from existing liquidity.
The closing of the transaction is expected to occur in the third quarter of 2017.
Teekay Offshore Partners
According to statements from both companies, Brookfield and Teekay Corporation, parent company of Teekay Offshore, will invest $610 million and $30 million, respectively, in Teekay Offshore at a price of $2.50 per common unit and receive 65.5 million Teekay Offshore warrants on a pro rata basis.
Brookfield will also acquire a $200 million loan to Teekay Offshore from Teekay Corporation at a discount. The intercompany loan will be acquired for $140 million in cash and 11.4 million of warrants to be issued to Brookfield. Also, Brookfield agreed to extend the maturity date of the intercompany loan from 2019 to 2022.
As part of the transaction, Teekay Corporation will be co-investing alongside Brookfield and will retain a 14 percent ownership of Teekay Offshore.
Teekay Offshore GP L.L.C.
Brookfield will also acquire a 49 percent interest in Teekay Offshore’s general partner, Teekay Offshore GP L.L.C. Teekay Corporation will continue to hold 51 percent of TOO GP, but Brookfield does have the option to acquire an additional two percent of TOO GP subject to the satisfaction of certain conditions.
Upon closing of the transaction, Brookfield will appoint four of nine directors to the board of TOO GP.
Cyrus Madon, CEO of Brookfield Business Partners, said: “Our investment represents an opportunity to acquire a high quality, highly contracted business with a presence in attractive markets, and we look forward to supporting Teekay Offshore with its continued growth.”
Kenneth Hvid, Teekay’s President and CEO, said: “We are excited to have Brookfield join us as a strategic partner and co-sponsor of Teekay Offshore. Out of the range of alternatives evaluated, we believe this comprehensive solution represents the best possible outcome for all of our long-term stakeholders and positions Teekay Offshore to benefit from an energy market recovery.
“This transaction maintains the stability of Teekay Offshore’s significant forward cash flows and also improves Teekay Corporation’s financial position by eliminating all of its financial guarantees to Teekay Offshore and increasing its liquidity by approximately $140 million. This will enhance Teekay’s ability to be a supportive sponsor to all of its daughter companies going forward.”
Ingvild Sæther, President and CEO of Teekay Offshore, added: “This transaction fully finances Teekay Offshore’s existing growth projects which, when delivered over the next few quarters, are expected to contribute an incremental $200 million of run-rate annual cash flow from vessel operations.
“Longer-term, the co-sponsorship of Brookfield and Teekay will provide greater access to capital, which will enable Teekay Offshore to better service its customers and take advantage of future growth opportunities as the global energy markets recover. ”
In addition to the deal, Teekay Offshore said it had reached an agreement in principle with the lenders of the Arendal Spirit UMS debt facility to extend the mandatory prepayment date out to September 30, 2018, in exchange for a certain principal prepayment, subject to receipt of lenders’ final internal approvals.
Also, Teekay Offshore said it would transfer its shuttle tanker business into a new, wholly-owned, non-recourse subsidiary, Teekay Shuttle Tankers L.L.C. (ShuttleCo).