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TC Energy won't raise offer price for outstanding shares of US gas pipeline MLP

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TC Energy won't raise offer price for outstanding shares of US gas pipeline MLP


Large shareholder calls bid 'inadequate'

Midstream sector sees wave of corporate simplifications

Houston — TC Energy will not raise its $1.68 billion offer for the master limited partnership that owns some of its affiliated US natural gas pipelines, the Canadian company said Feb. 22.

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The company's statement came days before a key shareholder vote, in response to an investor's recent assertion that the current offer, already an increase from an earlier one, was inadequate.

TC Energy believes its offer amounts to a meaningful premium that represents "the best opportunity" for TC PipeLines investors to maximize value. Should a majority of shareholders not vote to approve the merger agreement, TC PipeLines will remain a standalone company, TC Energy said.

The statement follows a Feb. 19 letter to TC PipeLines from asset manager Energy Income Partners, which describes itself as the largest non-affiliated shareholder of TC PipeLines. EIP, which owned approximately 11% of the outstanding shares as of Dec. 31, said it planned to vote against the merger, arguing that the offer was "inadequate and grossly undervalues TCP's assets and existing organic growth opportunities."

"Absent a higher offer, there is a strong standalone case that we believe TCP should pursue to maximize shareholder value through a tax efficient conversion to a C-corporation," Energy Income Partners CEO James Murchie said in the letter.

The TC Energy offer is part of a wave of corporate simplification in the midstream sector designed to make it cheaper for companies that operate pipelines, gathering systems and processing facilities to fund new growth projects.

In October 2020, TC Energy made a $1.48 billion offer to acquire the approximately 76% of outstanding shares of TC PipeLines that TC Energy does not already own, in a bid to put the MLP fully under TC Energy's umbrella. Two months later, it increased its offer to $1.68 billion, based on the number of shares available at the time.

TC PipeLines unitholders will receive 0.70 common shares of TC Energy for each issued and outstanding publicly-held TC PipeLines common unit. The original offer included an exchange ratio of 0.650 common shares of TC Energy for each outstanding TC PipeLines common unit.

A TC Energy subsidiary is the general partner of TC PipeLines, which owns, operates or holds stakes in gas pipelines that serve the US West, Midwest and Northeast and interconnect with TC Energy's larger natural gas pipeline network.

The assets, which include Portland Natural Gas Transmission System in New England, Great Lakes Gas Transmission in the Midwest, Bison pipeline in Wyoming, and Gas Transmission Northwest in the Pacific Northwest, provide an outlet for gas produced in key North American supply basins, including the Western Canada Sedimentary Basin.

A special meeting of shareholders is scheduled for Feb. 26 to vote on the merger.

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