Stonepeak agreed to buy Teekay LNG Partners on Oct. 4 marking the second multibillion-dollar investment recently made by the New York-based firm in the LNG space.

“Stonepeak has long recognized the growing global demand for LNG and importance of natural gas as a bridge fuel, particularly as the world continues to shift toward cleaner sources of energy,” James Wyper, senior managing director at Stonepeak, commented in a joint release.

Teekay LNG is one of the world’s largest independent owners and operators of LNG carriers, providing LNG and LPG services primarily under long-term, fee-based charter contracts. The company is a publicly traded MLP formed by Teekay Corp. as part of its strategy to expand its operations in the LNG and LPG shipping sectors.

Kenneth Hvid, Teekay’s president and CEO, described the transaction with Stonepeak as a unique opportunity to monetize its position in Teekay LNG while also realizing an attractive return on investment for Teekay and for Teekay LNG common unitholders.

“Since the initial public offering in 2005, Teekay has built Teekay LNG into the world’s third largest independent LNG carrier owner and operator, with one of the biggest and most diversified portfolios of long-term contracts with leading players in the LNG industry,” Hvid added in the release.

Teekay LNG currently holds ownership interests in 47 LNG carriers, 21 midsize LPG carriers, and seven multi-gas carriers. In addition, Teekay LNG owns a 30% interest in an LNG regasification terminal.

On Oct. 4, Stonepeak said it is offering $17 per unit to acquire all the issued and outstanding common units in Teekay LNG, which represents an enterprise value of $6.2 billion, according to the release. Excluding Teekay’s debt, the transaction is valued at roughly $1.5 billion and the companies expect to close the deal by year-end 2021.

“Through this transaction, we have an exciting opportunity to invest in a critical energy transition infrastructure business in the form of Teekay LNG’s high-quality, modern fleet of vessels and stable long-term customer contracts,” Stonepeak’s Wyper continued in his statement.

Previously, Stonepeak was part a 50:50 partner in Hygo Energy Transition Ltd., a Brazilian LNG-to-power business, with Golar LNG Ltd. The companies sold Hygo, however, to New Fortress Energy Inc. in a cash-and-stock transaction worth roughly $2.18 billion in April.

Prices of the benchmark U.S. natural gas contract have been on the rise. On Oct. 5, the front-month gas futures contract was jumped over 9% to a 12-year high as soaring global prices kept demand for U.S. LNG exports strong, according to a Reuters report.

“We are particularly excited to partner with Teekay LNG’s best-in-class management team to bring cheaper, cleaner, more reliable energy supply to all parts of the world,” Wyper continued, “especially in Asia where we have been active investors in the ongoing shift to cleaner fuels and renewables.”

Mark Kremin, president and CEO of Teekay Gas Group, called the transaction transformative in the release.

“Under Stonepeak’s ownership, we expect Teekay LNG to have improved access to competitively priced capital for both fleet renewal and potential future growth in the next phase of our development, which has not been available through the public equity capital markets for many years,” Kremin commented.

After the completion of the transaction, the common units of Teekay LNG will be delisted from the New York Stock Exchange (NYSE), the release said. The Series A and B preferred units of Teekay LNG are expected to remain outstanding and continue to trade on the NYSE following the completion of the transaction.

Morgan Stanley & Co. LLC is financial adviser to Teekay LNG for the transaction and Squire Patton Boggs (US) LLP and Perkins Coie LLP are serving as its legal advisers. Houlihan Lokey Capital Inc. is financial adviser and Potter Anderson & Corroon LLP is legal adviser to the conflicts committee of Teekay GP. DNB Markets is financial adviser to Stonepeak and Simpson Thacher is its legal adviser.

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