A compromised conflicts committee put up the weakest of fights before approving Brookfield Business Partners' takeover of Teekay Offshore, according to new allegations from a group of minority shareholders.
The investors, led by J Deal Partnership, said the committee convened to evaluate the take-private offer was not truly independent and solicited bad advice to back up Brookfield's severely discounted $1.55 per share buyout offer after the Canadian private equity company purposefully tanked Teekay Offshore's share price.
"Put plainly, Brookfield went from a savior in the summer of 2017 to a plunderer less than a year later," the shareholders argue in their amended complaint, filed in Manhattan federal court last week.
The new complaint, following on their initial filing in July, expands allegations against Teekay Offshore, its board, Brookfield Business Partners and Brookfield Asset Management. It seeks unspecified damages and class-action status.
J Deal is joined by Aquamarine Master Fund and Mark Whiting as lead plaintiffs. Noster Capital and Steven Monosson are also listed as plaintiffs.
Brookfield first took a position in the New York-listed offshore player in 2017, taking a 60% stake in exchange for recapitalising the company. It announced take-private plans in May 2019, after buying out Teekay Corp, acquiring 77.1% of all shares. It first offered the remaining holders $1.05 per share, before bumping it up to $1.55.
According to the complaint, the conflicts committee met shortly after Brookfield's initial offer. It was supposed to be comprised entirely of independent board members, but instead, for a six-day period, included Bill Transier, a board member at Brookfield affiliate Westinghouse and a board member at other Brookfield companies and William Utt, a director at Teekay Corp.
David Lemmon and Ian Craig rounded out the committee. The shareholders argue it should have taken a defensive position, like a poison pill, to prevent Brookfield from acquiring 80% of Teekay Offshore shares in order to force a call right.
Instead, they quickly dropped any resistance to Brookfield, like improving the offer to as much as $1.80 per share or having the merger contingent on a majority of the minority shareholder vote.
Further, the complaint contends that Evercore, brought on to help evaluate the deal, was biased toward Brookfield and used revenue projections that predicted no new contracts or contract extensions until 2023, then all contracts being renewed thereafter.
Evercore is not named as a defendant in the case and declined to comment for the story.
It also says Teekay Shuttle Tankers' green bond, issued in October, painted parent Teekay Offshore as poised for growth, despite the bargain price Brookfield was offering minority shareholders.
That green bond reportedly fell short of its target, with environmentally-conscious investors steering clear of a company that carries crude oil. Teekay Offshore has denied that is the case.
The offers came after shareholders allege several other dirty tricks on Brookfield's part, including cutting dividends down to zero, cutting off communication with investors and refusing the market the company's new, dividend-less strategy to investors, all to tank share prices.
"Despite [the $1.55 offer] being a higher offer than the original proposal in May, the Final Offer Price still meaningfully undervalued the Partnership — as judged by analysis based on public information, and as by Brookfield itself," the complaint reads.
Teekay Offshore attorney David Sterling of Baker Botts did not return requests for comment. Sterling also represents the company's board members.
On 23 January, Brookfield announced it had completed the Teekay Offshore takeover.
The company will get a new name, Altera Infrastructure, in March.
As part of the takeover, Lemmon departed the board, alongside Kenneth Hvid.
Utt replaced Lemmon on the board's audit committee.
