TC Energy Offers $1.48B Acquisition Deal to TC PipeLines

TC Energy Corporation TRP recently announced that it has offered to acquire all TC PipeLines’ TCP outstanding units for $1.48 billion that it does not completely own. The move comes at a time when the company plans to remove the master limited partnership (MLP) structure of TC PipeLines, a corporate set-up once popular in the U.S. pipeline industry.

This strategic action will provide TC PipeLines unitholders with 0.650 common shares of TC Energy for each issued and outstanding publicly-held TCP common unit, accounting for a 5.4% premium to the closing price as of Oct 2.

The currently Zacks Rank #3 (Hold) TC Energy made its proposal to the board of the general partner of TC PipeLines. This is because the general partner of TC PipeLines is a subsidiary of TC Energy and a conflicts committee comprising independent directors of TC PipeLines will be formed to take into consideration the offer and make a recommendation. TC Energy appointed JPMorgan Chase Co. as its financial adviser for the deal and Vinson & Elkins LLP is its legal adviser. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The deal is contingent on the review and favorable recommendation of the Conflicts Committee of the TCP Board and approvals of the TCP Board, the Board of Directors of TC Energy and the holders of a majority of the outstanding common units of TCP.

TC Energy’s takeover bid for its pipeline partnership is part of the ongoing simplification of corporate structures in the MLP space. The series of transactions — primarily consolidations by parents structured as C-Corps leading to the elimination of the MLP model — are aimed at better corporate governance and lower cost of capital in a softer market. Over the years, firms including Kinder Morgan KMI, Williams Companies WMB and Enbridge Inc. have snapped up the remaining stakes of their midstream subsidiaries.

About TC Energy

Calgary, Alberta-based TC Energy is a premier energy infrastructure provider in North America. Established in 1951, the company is primarily focused on natural gas transmission through its 57,500-mile network of pipelines located in Canada, the United States and Mexico. TC Energy is also involved in other businesses including power generation, natural gas storage and crude oil pipelines.

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