Teekay Offshore Partners L.P. (NYSE: TOO) is running for the top in the market this morning, and for good reason. The company announced that it has entered into an agreement and plan of merger, sending the stock soaring more than 30% early on. Here’s what’s happening:
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TOO Announces Merger News
In a press release issued early this morning, Teekay Offshore Partners announced that it has entered into an agreement and plan of merger with Brookfield Business Partners and some affiliates and institutional partners.
As a result of the agreement, the Brookfield Consortium will acquire all outstanding publicly held units not already owned through a merger. In the release, TOO said that Brookfield will acquire outstanding units for $1.55 per unit in cash, representing a premium of 33.6% over the closing price as of September 30, 2019.
Current holders of shares can either choose to receive cash as part of the deal, or elect to receive one newly designated unlisted Class A Common Unit of the Partnership.
In the release, TOO said that the merger is expected to come to a close in the fourth quarter of 2019. Of course, the deal is subject to customary closing conditions.
What To Consider If You Own Shares
If you own shares of Teekay Offshore Partners, you have some decision making to think about. When the deal goes through, are you going to want cash or will you want the newly issued shares of the partnership? Here are a couple of things to consider:
Consider The Cash Premium
A premium of more than 30% is a very strong permium in any merger or acquisition. In this particular case, this offers a big win for investors and provides an immediate return of value.
Consider this, to receive a 30% return at an average annual return of 10%, it would take you three years. This deal offers that immediately, giving you the opportunity to reinvest your returns in other high-growth opportunities.
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