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

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

October 5, 2020   by CP STAFF

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.


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.”