Brookfield Business Partners' offer to take Teekay Offshore private severely undervalues the company, shareholders argued in a letter Friday.
New York-based JDP Capital Management and 16 other shareholders said the offshore player is worth a minimum of $4 per share, much higher than Brookfield's $1.05 per share offer made Monday.
They want the special committee of Teekay Offshore directors to hire an independent third party to determine its fair value and for Brookfield to disclose what it thinks the company is worth.
"JDP believes TOO is worth at least $4 per share today based on existing cash flow, asset quality, counterparty profiles, unique duopolistic market position in its shuttle tanker fleet, highly profitable Brazilian FPSO JVs, and a balance sheet that has been de-risked," the letter read, referring to Teekay Offhore by its ticker symbol TOO.
"[W]e would be happy to continue owning the public stock — even at the currently depressed price — we know that the company’s economic value will be reflected in the stock over time."
TradeWinds has requested comment from Teekay Offshore on the JDP letter.
Brookfield currently owns 77.1% of the owner floating production units, shuttle tankers and offshore vessels. The Toronto-based private equity firm said Monday it intends to buy out the remaining shareholders and take the company private.
Brookfield chief executive Cyrus Madon said the $1.05 offer represented fair value for the remaining 41.6 million shares.
But the shareholders — who together own at least 5% of the company and includes Zurich-based Aquamarine Capital Management and its 1 million share position — said that price is based off Brookfield's $100m late April purchase of Teekay Corp's position in Teekay Offshore. They say Teekay Corp was a "forced seller" as they needed cash to refinance their unsecured debt.
"[Brookfield's] offer is a 58% discount to what BBU paid for control of TOO in July 2017 (almost two years ago) BEFORE the balance sheet was stabilized, BEFORE Brent crude prices had rebounded, and BEFORE TOO was strategically positioned to take advantage of a strong rebound in Offshore North Sea, Canada and Brazil drilling activity (TOO’s customers)," the letter said.
They also argue that the deal damages the Brookfield brand as it sets a precedent for it to "abuse control and take advantage of minority investors for even a small amount of potential return."
At the start of trading Friday, Teekay Offshore shares were trading at $1.13, up almost 3% or $0.03.
