The private equity group of Brookfield Asset Management has agreed to acquire 60 percent of Teekay Offshore Partners LP (NYSE: TOO), a provider of marine solutions focused on production and logistics to the offshore oil industry. Brookfield will pay about US$750 million for the stake. It will partner with Teekay Offshore’s parent, Teekay Corp (NYSE: TK), a Vancouver-based marine energy specialist, which will retain a 14 percent interest in the affiliate. As part of the deal, Brookfield will acquire 49 percent of Teekay Offshore’s general partner, with an option to buy an additional 2 percent. With the deal’s close, it will appoint four directors to the general partner’s board.
Brookfield Business Partners to Acquire 60% of Teekay Offshore Partners L.P.
BROOKFIELD, NEWS–(Marketwired – July 26, 2017) – Brookfield Business Partners L.P. (NYSE:BBU)(TSX:BBU.UN) (“Brookfield Business Partners”) together with its institutional partners (collectively “Brookfield”), announced today that it has entered into an agreement to acquire 60% of Teekay Offshore Partners L.P. (NYSE:TOO) (“Teekay Offshore”), a leading global provider of marine services and solutions focused on production and logistics to the offshore oil industry. Teekay Offshore is a publicly traded subsidiary of Teekay Corporation (NYSE:TK), one of the world’s largest marine energy transportation, storage and production companies.
Brookfield’s total investment is expected to be approximately $750 million. As part of the transaction, Teekay Corporation will be co-investing alongside Brookfield and will retain a 14% ownership of Teekay Offshore.
Brookfield will invest $610 million for newly-issued common units of Teekay Offshore and will acquire a $200 million loan to Teekay Offshore from Teekay Corporation at discount to par. Brookfield will also acquire 49% of Teekay Offshore GP L.L.C. (TOO GP), the general partner of Teekay Offshore, and Teekay Corporation will continue to hold 51% of TOO GP. As part of the transaction, Brookfield has the option to acquire an additional 2% of TOO GP subject to the satisfaction of certain conditions.
“Teekay Offshore has established itself as a global leader in the provision of marine services to the offshore oil production industry,” said Cyrus Madon, CEO of Brookfield Business Partners. “Our investment represents an opportunity to acquire a high quality, highly contracted business with presence in attractive markets, and we look forward to supporting Teekay Offshore with its continued growth”.
Upon closing of the transaction, Brookfield will appoint four of nine directors to the Board of TOO GP.
Teekay Offshore provides a wide range of marine services including transportation, oil production, storage, towing and offshore installation and maintenance and safety services to the oil industry, primarily focusing on the offshore oil regions of the North Sea, Brazil and the east coast of Canada.
Teekay Offshore has consolidated assets of $5.6 billion and its fleet of 62 offshore vessels provides critical services to its customers.
Annual Adjusted EBITDA1 of approximately $590 million
Average contract duration of 4 years with strong prospects for contract extensions
Strong relationships with global exploration and production companies
Control of approximately 40% of the world’s shuttle tanker fleet, specialized vessels that transport crude oil and condensates from offshore production sites to onshore terminals and refineries
The world’s fourth largest portfolio of FPSO units (floating production, storage and offloading) which Teekay Offshore leases to global exploration and production companies in the North Sea and Brazil
A diversified portfolio of high-quality FSO units (floating storage and offloading) and high-spec, long distance towage vessels
Teekay Offshore has a substantial portfolio of medium to long-term, fixed-rate contracts with high quality, primarily investment grade counterparties. The existing portfolio is comprised of several growth projects in late stages of completion which are expected to provide significant near and longer-term cash flow growth. As a fee-based business focused on critical transportation and production services, Teekay Offshore has limited direct commodity exposure.
Brookfield Business Partners will fund the investment from existing liquidity.
Prior to or following closing, a portion of Brookfield Business Partners’ investment may be syndicated to other institutional investors.
Closing of the transaction remains subject to customary conditions, including, among others, regulatory approvals. Closing of the transaction is expected to occur in the third quarter of 2017.
Brookfield Business Partners is a business services and industrial company focused on owning and operating high-quality businesses within Brookfield’s private equity group that benefit from barriers to entry and/or low production costs. Brookfield Business Partners is listed on the New York and Toronto stock exchanges. Further information is available at http://bbu.brookfield.com. Important information may be disseminated exclusively via the website; investors should consult the site to access this information.
Brookfield Business Partners is the flagship listed business services and industrials company of Brookfield Asset Management, a leading global alternative asset manager with approximately $250 billion of assets under management. For more information, go to www.brookfield.com.
1 2016 Adjusted EBITDA per Teekay Offshore Partners L.P.’s 2016 form 20-F.
Photo courtesy of Teekay Corp