Canada's TC Energy reaches firm deal to put US pipelines MLP under its umbrella - S&P Global

Houston — TC Energy secured an agreement to absorb the master limited partnership that owns some of its affiliated US natural gas pipelines after boosting its offer price, the company said Dec. 15.

The transaction is expected to close in the latter part of the first quarter or early part of the second quarter of 2021, subject to certain approvals, the Canadian company said In a statement announcing that it had now reached a definitive agreement on the acquisition.

The move 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, 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.

After the initial announcement, heavy trading in TC PipeLines pushed company shares above the offer's implied value for the company, suggesting that TC Energy might have to boost its offer to satisfy investors.

In its statement Dec. 15, TC Energy said TC Pipelines unitholders will receive 0.70 common shares of TC Energy for each issued and outstanding publicly-held TC Pipelines common unit. That's a 19.5% premium to the TC Pipelines closing price on the trading day before the original offer. The original offer included an exchange ratio of 0.650 common shares of TC Energy for each outstanding TC Pipelines common unit.

The new exchange ratio reflects a value for all the publicly-held common units of TC Pipelines of approximately $1.68 billion.

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.