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TC Energy makes $2B offer to take over US pipeline partnership

By CP STAFF   

General Energy Oil & Gas energy manufacturing pipeline TC Energy

Buyout of the partnership it doesn't already own will require the pipeline company to issue as many as 35.2 million shares.

CALGARY — Pipeline and power company TC Energy Corp. is moving to buy out the other unitholders in TC PipeLines, LP, a US master limited partnership it operates, for about $1.97 billion in shares.

The Calgary-based company says it will offer 0.65 of a share in the parent company for each TC PipeLines unit, the equivalent of US$27.31 per unit based on the TC Energy’s Oct. 2 closing price and reflecting a 7.5% premium to the 20-day volume weighted average price of TC Pipelines.

The buyout of the 74.5% of the partnership it doesn’t already own will require TC Energy to issue as many as 35.2 million shares, adding about 3.7% to its 940-million outstanding total.

In Toronto, TC Energy traded down by as much as 96 cents or 1.7 per cent at $54.95. The stock has fallen more than 25%t since hitting a 52-week high close of $76.06 on Feb. 20.

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On the New York Stock Exchange, TC Pipelines’ units under the TCP symbol climbed by as much as 8.9% to US$28.22. The partnership owns eight interstate natural gas pipelines which serve markets in the western, Midwestern and northeastern United States.

In a report to investors, analyst Ian Gillies of Stifel FirstEnergy points out that TC Energy would also take on C$2.5 billion of TC Pipelines’ net debt as part of the transaction.

“Since early 2018, the share prices of TRP and TCP have decoupled, with TCP losing its relevance as a funding vehicle,” he said. “As such, it makes sense for TRP to consolidate these assets.”

 

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