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Item 1.01
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Entry into a Material Definitive Agreement.
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Agreement and Plan of Merger
On December 14, 2020, TC PipeLines,
LP, a Delaware limited partnership (the “Partnership”), TC PipeLines GP, Inc., a Delaware corporation and the
general partner of the Partnership (the “GP”), TC Energy Corporation, a Canadian corporation (“TC Energy”),
TransCan Northern Ltd., a Delaware corporation (“TransCan Northern”), TransCanada PipeLine USA Ltd., a Nevada corporation
(“TC PipeLine USA”), and TCP Merger Sub, LLC, a Delaware limited liability company and an indirect wholly owned subsidiary
of TC Energy (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant
to the Merger Agreement, Merger Sub will be merged with and into the Partnership (the “Merger”), with the Partnership
continuing as the sole surviving entity and a wholly owned subsidiary of TC Energy.
Subject to the terms and conditions set
forth in the Merger Agreement, at the effective time of the Merger, each common unit representing a fractional part of the limited
partner interests in the Partnership (each, a “Common Unit”) issued and outstanding immediately prior to the effective
time of the Merger, other than Common Units owned by TC Energy and its affiliates, will be cancelled in exchange
for 0.70 shares of TC Energy common stock (“TC Energy Common Stock”).
The conflicts committee (the “Conflicts
Committee”) of the board of directors (the “Board”) of the GP has, acting in good faith, unanimously, (i) determined
that the Merger Agreement and the transactions contemplated thereby are fair and reasonable to, and in the best interests of, the
Partnership and the holders of the outstanding Common Units (other than TC Energy and its affiliates), (ii) approved the Merger
Agreement and the transactions contemplated thereby, on the terms and subject to the conditions set forth in the Merger Agreement,
which such approval constituted “Special Approval” for all purposes under the limited partnership agreement of the
Partnership, (iii) recommended that the Board approve the Merger Agreement and the transactions contemplated thereby, (iv) recommended
that the Board approve the execution, delivery and performance of the Merger Agreement and the consummation of the transactions
contemplated thereby, including the Merger and (v) recommended that the Board direct that the Merger Agreement be submitted
to a vote of the limited partners for their approval at a special meeting and recommended that the Board recommend to the limited
partners of the Partnership that the limited partners approve the Merger Agreement and the Merger. Based upon such recommendation,
the Board has, acting in good faith unanimously (i) determined that the Merger Agreement and the transactions contemplated
thereby, including the Merger, are fair and reasonable to, and in the best interests of the Partnership and the holders of the
outstanding Common Units (other than TC Energy and its affiliates), (ii) approved the Merger Agreement and the transactions
contemplated thereby, including the Merger, on the terms and subject to the conditions set forth in the Merger Agreement, (iii) approved
the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated thereby,
including the Merger and (iv) resolved to recommend that the limited partners approve the Merger Agreement and the transactions
contemplated thereby, including the Merger, and directed that the Merger Agreement be submitted to the limited partners for their
approval at a special meeting.
Pursuant to the Merger Agreement, each
of TC Energy, TransCan Northern and TC PipeLine USA have agreed to (i) vote, or cause to be voted, all Common Units then owned
by it or its subsidiaries in favor of the approval of the Merger Agreement and the transactions contemplated thereby, including
the Merger and (ii) not, and cause each of its subsidiaries not, to transfer, assign or otherwise dispose of any Common Units
owned by TC Energy or its subsidiaries.
The completion of the Merger is subject
to certain customary closing conditions, including (i) receipt of approval of the Merger Agreement by vote of the limited
partners holding the Common Units constituting at least a majority of the outstanding Common Units entitled to vote at the special
meeting of the limited partners, (ii) the TC Energy Common Stock issuable in connection with the Merger having been approved
for listing on the NYSE and the TSX, subject to official notice of issuance, (iii) any waiting period applicable to the transactions
contemplated by the Merger Agreement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended having been terminated
or having expired, any required approval or consent under any other applicable antitrust law having been obtained and the approval
of the transaction from the Committee on Foreign Investment in the United States having been obtained; (iv) the absence of
any governmental order prohibiting the consummation of the Merger or the other transactions contemplated thereby, and (v) TC
Energy’s registration statement on Form F-4 having become effective under the Securities Act of 1933, as amended.
TC Energy, TransCan Northern, TC PipeLine
USA, Merger Sub, the Partnership and the GP have made customary representations and warranties, and agreed to customary covenants,
in the Merger Agreement. Subject to certain exceptions, TC Energy and the Partnership have each agreed, among other things, to
covenants relating to the conduct of their respective businesses during the interim period between the execution of the Merger
Agreement and the consummation of the Merger.
The Merger Agreement contains certain termination
rights that may be exercised by either TC Energy or the Partnership, including in the event that (i) both parties agree by
mutual written consent duly authorized by the Conflicts Committee on behalf of the Partnership and the TC Energy board of directors
to terminate the Merger Agreement, (ii) the Merger is not consummated by August 14, 2021 (the “Outside Date”),
(iii) any order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger having become final
and non-appealable, or (iv) if the special meeting of the limited partners has concluded and the requisite approval of the
limited partners has not been obtained. The Merger Agreement contains provisions granting TC Energy the right to terminate the
Merger Agreement for certain reasons, including (i) if a Partnership Adverse Recommendation Change (as the term is defined
in the Merger Agreement) shall have occurred, unless the special meeting of the limited partners was held and the vote to approve
the Merger taken, regardless of whether the requisite vote was obtained or (ii) if there has been a breach by the Partnership
of any representation, warranty, covenant or agreement contained in the Merger Agreement, or if any representation or warranty
of the Partnership shall have become untrue, in either case such that certain conditions to TC Energy’s obligation to consummate
the Transactions under the Merger Agreement would not be satisfied and such breach or failure to be true and correct is not curable
prior to the Outside Date, or if curable prior to the Outside Date, has not been cured within the earlier of (A) 60 days after
the giving of notice thereof by TC Energy to the Partnership or (B) the Outside Date, provided that this right shall not be
available to TC Energy if it has materially breached its representations, warranties, covenants or agreements contained in the
Merger Agreement. The Merger Agreement contains provisions granting the Partnership (duly authorized by the Conflicts Committee)
the right to terminate the Merger Agreement for certain reasons, including if there has been a breach by TC Energy, certain of
its subsidiaries or Merger Sub of any representation, warranty, covenant or agreement contained in the Merger Agreement, or if
any representation or warranty of TC Energy, certain of its subsidiaries or Merger Sub shall have become untrue in either case
such that certain conditions to the Partnership’s obligation to consummate the Transactions under the Merger Agreement would
not be satisfied and such breach or failure to be true and correct is not curable prior to the Outside Date, or if curable prior
to the Outside Date, has not been cured within the earlier of (A) 60 days after the giving of notice thereof by the Partnership
to TC Energy or (B) the Outside Date, provided that this shall not be available to the Partnership if it has materially breached
its representations, warranties, covenants or agreements contained in the Merger Agreement.
Upon termination of the Merger Agreement
under certain circumstances, the Partnership will be obligated to (i) pay TC Energy a termination fee equal to $25 million
or (ii) pay TC Energy an expense reimbursement amount equal to $4 million. The Merger Agreement also provides that upon termination
of the Merger Agreement under certain circumstances TC Energy will be obligated to pay the Partnership an expense reimbursement
amount equal to $4 million.
The foregoing description of the Merger
Agreement and the transactions contemplated thereby does not purport to be complete and is qualified in its entirety by the actual
Merger Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein
by reference. The representations, warranties, and covenants of each party set forth in the Merger Agreement were made only for
purposes of such agreements and as of specific dates, were solely for the benefit of the parties to the Merger Agreement, and may
be subject to limitations agreed upon by the contracting parties including (i) being qualified by confidential disclosures
made for the purposes of allocating contractual risk between the respective parties to such agreements instead of establishing
these matters as facts and (ii) being subject to standards of materiality that differ from those applicable to investors.
Investors should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of
the actual state of facts or condition of the parties thereto or of any of their respective subsidiaries or affiliates. Moreover,
information concerning the subject matter of representations and warranties may change after the date of the Merger Agreement,
which subsequent information may or may not be fully reflected in the Partnership’s public disclosures.
