A second group of shareholders have filed suit to block Brookfield Business Partners' discounted take-private offer for Teekay Offshore.
This time, Steven Monosson and Mark Whiting, who together own more than 2 million shares, are accusing Brookfield of breaching its fiduciary duty in concocting "a perfect method for bulldozing" shareholders on their way to full ownership of the offshore player.
Their lawsuit seeks class action status and names Brookfield, its chief executive Cyrus Madon, the Teekay Offshore general and limited partners and Teekay Offshore's board and C-suite as defendants.
"Brookfield [along with Teekay Offshore and its boards'] bulldozing of non-affiliated Teekay unitholders through its low-ball offer manifestly violates their fiduciary duties under the" limited partner agreement, reads the complaint, filed in Manhattan federal court Monday.
"Moreover, the process is rife with conflicts. Brookfield stands on both sides of the transaction."
Monosson and Whiting — who are represented by Scott+Scott — say the agreement specifies that the general partner has to act in "good faith" and in the "best interests" of the partnership.
In this case, they say Brookfield is the general partner, having acquired 100% of Teekay Offshore GP in May 2019.
The move capped off a series of investments into the struggling offshore player that began in mid-2017, when Brookfield received equity in exchange for capital.
The complaint says the moves Brookfield made in 2017 were initially cheered, but alleges the company's debt load helped hold down the share price.
That, coupled with a board and conflicts committee packed with Brookfield loyalists plus a 20 May take-private offer structured to bypass a limited partner vote were set to railroad shareholders.
The May offer saw Brookfield offer $1.05 for each outstanding share. Brookfield currently owns 77.1% of all shares including warrants and can trigger a call right on the remaining shares if they get to 80%.
Teekay Offshore shares were trading midday Tuesday at $1.16 and have never, since the company went public in late 2006, traded below $1.06.
The offer rankled shareholders, with JDP Capital Management and others sending a letter 24 May asking for a special committee of directors and independent third parties evaluate the deal.
A week later, Teekay Offshore announced that Evercore Group and Potter Anderson & Corroon would look at Brookfield's offer alongside the conflicts committee.
In their lawsuit, Monosson and Whiting argue that both third parties have worked with Brookfield in the past and that five of the nine board members, including members of the conflicts committee, are current or recent Brookfield employees.
JDP has also filed suit, with Noster Capital and Aquamarine Fund joining as plaintiffs.
The trio allege in a 12 July complaint that Brookfield worked to squeeze out Teekay Offshore shareholders while the board did nothing.
JDP values Teekay Offshore between $2.53 and $9.55 per share, while Noster said shares could be worth $5.61 by 2022. Monosson's valuation was between $2.25 and $7.08.
For the last year, Teekay Offshore shares have traded between $1.06 and $2.52.
Brookfield did not immediately respond to requests for comment.
Teekay Offshore chief financial officer Jan Rune Steinsland — a defendant in Monosson and Whiting's lawsuit — declined comment only to say that the conflicts committee's evaluation of the deal is ongoing and that management is not involved.
