TC Energy (NYSE:TRP) Corporation TRP has reached an agreement to acquire all the remaining outstanding units of its subsidiary TC PipeLines, LP TCP in an all-stock deal worth $1.68 billion.
This strategic move will provide TC PipeLines unitholders with 0.70 common shares of TC Energy for each unit held, which accounts for a 19.5% premium on TC PipeLines’ closing price as of Oct 2, 2020 prior to its initial acquisition announcement.
TC Energy currently holds 23.96% ownership in TC PipeLines, a publicly-traded master limited partnership that owns, operates, develops and acquires pipelines and other midstream assets.
The company’s president and CEO Russ Girling states that "The acquisition of TC PipeLines, provides us with the opportunity to consolidate our ownership interest in eight FERC regulated natural gas pipelines that are an integral part of our overall North American network. In addition, completion of the transaction will serve to further simplify our corporate structure.”
Upon meeting all the regulatory approvals and winning a considerable support from TC Pipelines (NYSE:TCP) unitholders in favour of this deal, the transaction is slated to be closed by the first quarter or early second quarter of 2021. Post completion of the deal, TC Energy will fully own TC Pipelines and the latter will no longer be a publicly-held master limited partnership (MLP).
The currently Zacks Rank #3 (Hold) TC Energy’s proposed takeover of its pipeline partnership is part of the ongoing simplification of corporate structures in the MLP space. The series of transactions — primarily consolidations by the parent companies structured as C-Corps resulting in 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 (NYSE:KMI) KMI, Williams Companies (NYSE:WMB) WMB and Enbridge (NYSE:ENB) Inc. have acquired the remaining stakes in their midstream subsidiaries. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Company Summary
Calgary, Alberta-based TC Energy Corporation 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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