Brookfield makes big investment in Teekay Offshore Partners

Teekay Offshore's Amundsen Class shuttle tankers Teekay Offshore's Amundsen Class shuttle tankers

JULY 27, 2017 — Toronto- headquartered Brookfield Business Partners L.P. has entered into an agreement to acquire 60% of Teekay Offshore Partners L.P., a publicly traded subsidiary of Teekay Corporation.

Brookfield's total investment is expected to be about $750 million. As part of the transaction, Teekay Corporation (NYSE:TK) will co-invest alongside Brookfield and will retain a 14% ownership of Teekay Offshore (NYSE:TOO).

Brookfield, which is listed on the New York and Toronto stock exchanges (NYSE:BBU)(TSX:BBU.UN), 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, which would give it a controlling interest in Teekay Offshore GP.

"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".

"We are excited to have Brookfield join us as a strategic partner and co-sponsor of Teekay Offshore, which is a strong endorsement of Teekay Offshore's leading market positions in the marine infrastructure space," commented Kenneth Hvid, Teekay's President and CEO. "The combination of Teekay's operational platform and Brookfield's global business platform and access to long-term capital is a complementary fit and creates one of the world's strongest offshore marine infrastructure companies. Out of the range of alternatives evaluated, we believe this comprehensive solution represents the best possible outcome for all of our long- term stakeholders and positions Teekay Offshore to benefit from an energy market recovery. This transaction maintains the stability of Teekay Offshore's significant forward cash flows and also improves Teekay Parent's financial position by eliminating all of its financial guarantees to Teekay Offshore and increasing its own liquidity by approximately $140 million. This will enhance Teekay Parent's ability to be a supportive sponsor to all of its daughter companies going forward."

"Brookfield's co-sponsorship in Teekay Offshore provides both immediate and long-term benefits," commented Ingvild Sæther, President and CEO of Teekay Offshore Group Ltd. "This transaction fully finances Teekay Offshore's existing growth projects which, when delivered over the next few quarters, are expected to contribute an incremental $200 million of run-rate annual cash flow from vessel operations. Longer-term, the co-sponsorship of Brookfield and Teekay will provide greater access to capital, which will enable Teekay Offshore to better service its customers and take advantage of future growth opportunities as the global energy markets recover. Our recent order of shuttle tanker newbuildings to service Teekay Offshore's North Sea Master Agreement with Statoil is just one example of the customer demand we are already seeing for our offshore production and logistics services."

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