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Why Investors Should Vehemently Reject Teekay LNG's Proposed Take-Under Offer

Oct. 05, 2021 2:05 PM ETTeekay LNG Partners L.P. (TGP), TK111 Comments
Pedro de Noronha profile picture
Pedro de Noronha


  • Low-ball take-under offer at $17 per unit - just as energy-related stocks have started to move.
  • TGP’s management is rewarding shareholders’ loyalty and patience since 2014 by insulting their intellect and stripping them of significant potential upside.
  • TGP unitholders have not just a right to vote down this attempted take-under, but in our opinion, a duty to do so.

3D rendering gas tanker sailing in ocean

Don't let TGP ship away for a ridiculous $17/share....

alvarez/E+ via Getty Images

For the last few years, being an owner of Teekay LNG (“TGP”) - or any of the other TK family entities for that matter - has not been a lot of fun. There

This article was written by

Pedro de Noronha profile picture
Pedro de Noronha is the Managing Partner and Portfolio Manager at Noster Capital. Before forming Noster Capital in September 2007, Pedro de Noronha managed the European Special Situations Portfolio for the Proprietary Positioning Business at JP Morgan, where he was employed from 2003. Prior to this, Pedro de Noronha was a mergers and acquisitions analyst for the energy team and global debt markets associate covering Portugal and Italy at Merrill Lynch. Noster Capital was formed in September 2007 and is a London based hedge fund which invests globally following a value investing philosophy focusing on absolute returns. Noster was largely profitable during the string of the worst months of the financial crisis The Noster Capital Fund was launched in March 2008 and is a Global Value Fund which invests in both long/short strategies along with other asset classes. The fund is a value investing fund; it typically invests in equities offering value opportunities relative to intrinsic value, and the exposure is hedged against the market, depending on the stage of the market cycle and on the manager’s view of overall market conditions. The fund invests in any asset class and any cap, and also invests in unlisted investments.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of TGP either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (111)

how_bout_we_talk profile picture
and it looks even worse here only nine months later. They were in the catbird's seat and didn't even know it? Or they made a deal with the devil for themselves... Teekay, a name that will forever mean "can't get it done"...
Would selling before the closing date affect the chances of benefiting from any class action?
Henrik Alex profile picture

No. There won't be any class actions anyway.
In case anyone missed it, the acquisition by Stonepeak was approved via the TGP shareholders vote.

The only positive note in that is the expected closing date is now pushed to mid-January 2022, so for US-based taxpayers, not a taxable event for this year's return.
votye no get rid of mgmt. incompetent
voted no on 13000 shares but we'll still be out voted. a shame for sure
DS88 profile picture
Pursued Legal but lawyers doubtful they can recover enough damages to make it worthwhile, Marshall Island follows Delaware and business judgement rule is hard to defeat. That said i think unethical to have received such large payment from TGP for IDR promoting benefit to TGP limited's given bright outlook for higher and higher distributions...then 6 months later move to sell the Company, TGP Limited's never got a chance to benefit.. Voted NO on well over 100,000 shares
@DS88 I voted yes on my 10 shares
@DS88 I never seen such a sour puss that’s getting 1.7 million in cash!
ofirm profile picture
@DS88 The liability here lays with Teekay itself exactly for using numbers
that are so far away from the final numbers in order to convince whoever
they needed to (conflict committee) in order to be rewarded with the
extra units. the point is that they chose to provide information that (on its
face) was not true. they were in the process that ended up in this
transaction, so they probably knew they were misleading. discovery
should show that.
Voted NO for merger with my 1000 shares
You make compelling arguments.

Your only option is for legal recourse since the votes seem to be mostly there for the sale to go through. However, all the points you make seem sound for the management to at least have to defend in a court of law. Minority shareholders have the right to be treated fairly.

Your argument will get stronger if management gets to keep their jobs which necessarily means they are not completely unbiased.
Pedro de Noronha profile picture
@ding dong trust me. The only way they are accepting this deal is because they are keeping their jobs….
@Pedro de Noronha ….and large bonuses.
So essentially TK (ultimate pos) is capped after getting rid of their crown jewel?
Don't see ANY positive catalysts in the forseeable future. What a pos co.
@mo2dafo buy tk and get cash at a 20 per cent discount

My main worry is tk blows the money on a green initiative .

All they have to do is look at Eneti
"...the shipping sector is full of deep-value names..." Which ones are you thinking of?
@36510 just my opinion
nmm,nm,cplp,insw &
Burry likes stng
FrenchTrading profile picture
Deja vu... TOO,.. remember ?!.
There is no chance of it being voted down but there is a chance for a better offer
Henrik Alex profile picture

Not really. Don't think that Stonepeak negotiated that deal exclusively.
@Henrik Alex You are probably correct. But you never know especially when it's trading above the offer price.
@Hockeyzan ,

Trading above the $17 buyout to capture the next distribution in about a month. Then it’ll probably trade at 17 till complete. JMO

Voting no of course and will be looking for other alternatives since it looks unlikely that the no’s will prevail
Rowbearto profile picture
A few legal firms have already jumped on this...

User46126116 profile picture
@Rowbearto Usual subjects. They jump on pretty much everything. Doesn’t mean much.
Pitivier profile picture
after the TGP operation TK will be at what level the debt on the balance sheet
Henrik Alex profile picture

I have discussed the issue here:

User46126116 profile picture
Only real hope is if someone comes in with a better offer. Probably not enough folks with deep enough pockets following the sector to make another offer though one never knows. But if they exist, Noster Capital must have contacts among those sort of folks. Can’t you drum someone up?
Henrik Alex profile picture
What's the average trading multiple of LNG peers today? :-))

This is just a waste of time with TK voting in favor of the transaction and basically each and every buyer of common units over the past six years sitting on sizeable gains.

There's ZERO chance for this call to succeed.
valuinvst profile picture
@Henrik Alex Well in 2018 it was over 17 so I'm not sure your comment is accurate at all. Maybe if you bought within the past 3 years you might have a decent return but not necessarily relative to the overall market. Returns were just starting to improve.
Henrik Alex profile picture

You are correct. TGP traded above $17 between August 2017 and May 2018.

That said, it doesn't really matter. Most of the more recent investors are sitting on nice profits and will happily take the cash offered by Stonepeak.

Even in case they don't there is still going to be a large number of non-voters.

The author's case is a non-starter.
@Henrik Alex ,

Yes, who cares what it traded for in 2018. Only matters what you are receiving and that will be $17. Have a large position and after going through the “vote no” with GLOG earlier this year, this is a waste of time.

All have good intentions here, but this is a done deal.

Only discussion left are the preferred, which have been talked about in detail on other threads related to this buyout.

Now is the time to research what you plan to invest in with the proceeds you will receive.

Right on! I am definitely voting NO with almost 1000 shares.
Tellurium128 profile picture
Does TK want to cash out due to liquidity issues? Perhaps they need cash because their own reasoning on fair value for TGP seems quite different from the reasons you outlined in this article
Henrik Alex profile picture

Yes, TK needs to take care for next year's $250 million debt maturity.
ofirm profile picture
@Henrik Alex if that was the only concern, they could have just sold
some of their holdings plus part of the gp to a financial investor. there
is something else here which is probably having to do with what they
think is an opportunity elsewhere to invest half the proceeds plus they
have more confidence now in the prospects of tnk and in the future
of the single fpso they have. no longer do they need tgp.
Henrik Alex profile picture

Don't think so. They apparently want to change the strategic direction of the company and I firmly expect the new Teekay to move into renewables.

Neither the tanker business nor the FPSO really move the needle for TK like TGP did.
the fat lady hasn't sung yet but she's warming up....let's see if any other company sees the value before tgp is swallowed whole....and at a big discount.
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