(Bloomberg) — TC Energy Corp. offered to buy all the shares of TC PipeLines LP it doesn’t already own for about $1.48 billion, the latest move to eliminate a master limited partnership structure, a corporate structure once popular in the U.S. pipeline industry.
Investors would receive 0.65 common shares of Calgary-based TC Energy for each unit of TC PipeLines, the companies said Monday. Based on Friday’s closing prices, the proposal values TC PipeLines at of $27.31 per unit, representing a 5.4% deal premium.
Spinning out pipeline business into separately listed entities using a tax-efficient partnership model was once a well-trodden path for energy companies to attract U.S. investors. However, the number of MLPs has dwindled since the crude-market crash of 2014-2016 and a change to U.S. tax policy that pummeled MLP stock prices. Last October, Hess Midstream Partners LP said it would ditch its partnership structure and special payouts to its general partner in a $6.2 billion deal. DCP Midstream LP eliminated special payouts in November.
TC Energy, the company behind the controversial Keystone XL pipeline, made its offer to the board of the general partner of TC PipeLines. Because the general partner is a subsidiary of TC Energy, a conflicts committee composed of independent directors of TC PipeLines will be formed to consider the offer and make a recommendation, TC Pipelines said in its statement.
JPMorgan Chase & Co. is TC Energy’s financial adviser on the deal and Vinson & Elkins LLP is its legal adviser.
(Updates with TC Energy’s advisers in last paragraph)
For more articles like this, please visit us at bloomberg.com
©2020 Bloomberg L.P.