As filed with the Securities and Exchange Commission on August 17, 2018

Registration No. 333-226231

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Cheniere Energy, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		4924		95-4352386
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)
		700 Milam Street Suite 1900 Houston, Texas 77002 (713) 375-5000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Michael J. Wortley

Executive Vice President and Chief Financial Officer

Cheniere Energy, Inc.

700 Milam Street

Suite 1900

Houston, Texas 77002

(713) 375-5000

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Francis J. Aquila Catherine M. Clarkin Krishna Veeraraghavan Sullivan & Cromwell LLP 125 Broad Street New York, New York 10004 (212) 558-4000		George J. Vlahakos Sidley Austin LLP 1000 Louisiana Street, Suite 6000 Houston, TX 77002 (713) 495-4522		Srinivas M. Raju Kenneth E. Jackman Richards, Layton & Finger, PA One Rodney Square 920 King Street Wilmington, Delaware 19801 (302) 651-7701

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and upon consummation of the merger described in the enclosed consent solicitation/prospectus.

If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		☒		Accelerated filer		☐
Non-accelerated filer		☐  (Do not check if a smaller reporting company)		Smaller reporting company		☐
				Emerging growth company		☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the SEC, acting pursuant to said section 8(a), may determine.

 

 

 

The information in this preliminary consent solicitation/prospectus is not complete and may be changed. Cheniere Energy, Inc. may not distribute or issue the securities being registered pursuant to this registration statement until the registration statement, as filed with the Securities and Exchange Commission (of which this preliminary consent solicitation/prospectus is a part), is effective. This preliminary consent solicitation/prospectus is not an offer to sell nor should it be considered a solicitation of an offer to buy the securities described herein in any state where the offer or sale is not permitted.

 

PRELIMINARY CONSENT SOLICITATION/PROSPECTUS—SUBJECT TO COMPLETION—DATED AUGUST 17, 2018

Cheniere Energy Partners LP Holdings, LLC

MERGER PROPOSAL—YOUR VOTE IS VERY IMPORTANT

Dear Cheniere Energy Partners LP Holdings, LLC shareholders,

Cheniere Energy, Inc. (“Cheniere”), Columbia Acquisition Sub LLC, a wholly owned subsidiary of Cheniere (“Merger Sub”), and Cheniere Energy Partners LP Holdings, LLC (“CQH”) entered into a Merger Agreement on June 18, 2018 (the “Merger Agreement”). Pursuant to the Merger Agreement, CQH will merge with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger as a wholly owned subsidiary of Cheniere, and all common shares of CQH representing limited liability company interests in CQH (“CQH Common Shares”) outstanding at the time at which the Merger becomes effective, which will be the date and at the time that the certificate of merger is filed with the Secretary of State of the State of Delaware, or a later date and time if set forth in the certificate of merger (the “Effective Time of the Merger” or the “Effective Time”), and not owned by Cheniere will be cancelled and converted into the right to receive 0.4750 shares of common stock, par value $0.003, of Cheniere (“Cheniere Common Stock”). No fractional shares of Cheniere Common Stock will be issued in the Merger. Any holder of CQH Common Shares (each, a “CQH Shareholder”) will be entitled to cash in lieu of receiving any fractional share of Cheniere Common Stock to which such holder would otherwise have been entitled. Holders of shares of Cheniere Common Stock (“Cheniere Stockholders”) will continue to own their existing shares of Cheniere Common Stock.

Based on the estimated number of shares of Cheniere Common Stock and the estimated number of CQH Common Shares that will be outstanding immediately before the date of the closing of the Merger (the “Closing Date”) (other than CQH Common Shares owned by Cheniere), we estimate that, upon the closing, the number of shares of Cheniere Common Stock issued in exchange for CQH Common Shares will represent approximately 3.5% of the shares of Cheniere Common Stock outstanding as of August 15, 2018.

The conflicts committee (the “CQH Conflicts Committee”) of the CQH Board of Directors (the “CQH Board”) unanimously determined that the Merger upon the terms set forth in the Merger Agreement is fair and reasonable to, and in the best interests of, CQH and the CQH Shareholders who are unaffiliated with Cheniere and its subsidiaries (the “Unaffiliated CQH Shareholders”), and has approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the Merger. This action of the CQH Conflicts Committee constitutes “Special Approval” of the Merger Agreement and the transactions contemplated thereby, including the Merger, under the Amended and Restated Limited Liability Company Agreement of CQH, dated as of December 13, 2013, as amended as of September 29, 2016 (as may be amended from time to time, the “CQH LLC Agreement”). The CQH Conflicts Committee recommended that the CQH Board approve the Merger upon the terms set forth in the Merger Agreement. Based upon the recommendation of the CQH Conflicts Committee, the CQH Board unanimously approved the Merger Agreement and the transactions contemplated thereby and determined that the Merger Agreement and the transactions contemplated thereby are fair and reasonable to, and in the best interests of, CQH and the Unaffiliated CQH Shareholders. The CQH Board approved the Merger Agreement and the transactions contemplated thereby and directed that the Merger Agreement be submitted to a vote of the CQH Shareholders. The CQH Board recommends that the CQH Shareholders consent with respect to the Merger Agreement and the Merger.

The approval of the Merger Agreement and the Merger by CQH requires the affirmative consent of holders of at least a majority of the outstanding CQH Common Shares. Pursuant to the terms of a Support Agreement, dated as of June 18, 2018, by and among Cheniere and CQH (the “Support Agreement”), Cheniere, which as of August 15, 2018 beneficially owned 212,953,991 CQH Common Shares representing approximately 91.9% of the outstanding CQH Common Shares, has irrevocably agreed to deliver a written consent covering all of the CQH Common Shares owned by Cheniere, approving the Merger, the Merger Agreement and any other matters necessary for consummation of the Merger and the other transactions contemplated in the Merger Agreement (the “Cheniere Written Consent”), within two business days after the effectiveness of the registration statement of which this consent solicitation/prospectus forms a part. The delivery of the Cheniere Written Consent by

Cheniere with respect to the CQH Common Shares Cheniere owns will be sufficient to approve the Merger Agreement and the Merger.

The CQH Board has set August 16, 2018 as the record date (the “Record Date”) for determining CQH Shareholders entitled to execute and deliver written consents with respect to this consent solicitation/prospectus. If you are a record holder of outstanding CQH Common Shares as of that date, you may complete, date and sign the enclosed written consent and promptly return it to CQH. Please read the section titled “Written Consents of CQH Shareholders” beginning on page 26 of this consent solicitation/prospectus.

This consent solicitation/prospectus provides you with detailed information about the Merger Agreement, the proposed Merger and related matters. We encourage you to read the entire document carefully. In particular, please read the section titled “Risk Factors” beginning on page 18 of this consent solicitation/prospectus for a discussion of risks relevant to the Merger, Cheniere’s business following the Merger, Cheniere Common Stock, CQH’s business and CQH Common Shares if the Merger does not occur and United States federal income tax consequences of the Merger.

Cheniere Common Stock is listed on the NYSE American LLC (“NYSE American”) under the symbol “LNG,” and CQH Common Shares are listed on the NYSE American under the symbol “CQH.” The last reported sale price of shares of Cheniere Common Stock on the NYSE American on August 16, 2018 was $61.23. The last reported sale price of CQH Common Shares on the NYSE American on August 16, 2018 was $29.64.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this consent solicitation/prospectus or has determined if this consent solicitation/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Cheniere and CQH have both contributed to the information relating to the Merger contained in this consent solicitation/prospectus. All information in this consent solicitation/prospectus concerning Cheniere has been furnished by Cheniere. All information in this consent solicitation/prospectus concerning CQH has been furnished by CQH.

This consent solicitation/prospectus is dated                     , 2018, and is being first mailed to CQH Shareholders on or about August 21, 2018.

 

IMPORTANT NOTE ABOUT THIS CONSENT SOLICITATION/PROSPECTUS

This consent solicitation/prospectus incorporates important business and financial information about Cheniere and CQH from other documents that Cheniere and CQH have filed with the United States Securities and Exchange Commission (the “SEC”) and that are contained in or incorporated by reference herein. For a listing of documents incorporated by reference herein, please read the section titled “Where You Can Find More Information” beginning on page 92 of this consent solicitation/prospectus. This information is available for you to review free of charge at the SEC’s public reference room located at 100 F Street, N.E., Room 1580, Washington, DC 20549, and through the SEC’s website at http://www.sec.gov.

You may request copies of this consent solicitation/prospectus and any of the documents incorporated by reference herein or other information concerning Cheniere or CQH, without charge, upon written or oral request to the applicable company’s principal executive offices. The respective addresses and telephone numbers of such principal executive offices are listed below.

 

Cheniere Energy, Inc. 700 Milam Street, Suite 1900 Houston, TX 77002 Attention: Investor Relations Department 713-375-5000 corporatesecretary@cheniere.com		Cheniere Energy Partners LP Holdings, LLC 700 Milam Street, Suite 1900 Houston, TX 77002 Attention: Investor Relations Department 713-375-5000 corporatesecretary@cheniere.com

Please note that copies of the documents provided to you will not include exhibits, unless the exhibits are specifically incorporated by reference into those documents or this consent solicitation/prospectus.

General information about Cheniere and CQH, including Cheniere’s and CQH’s annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments and exhibits to those reports, are available free of charge through Cheniere’s website at http://www.cheniere.com as soon as reasonably practicable after Cheniere or CQH file them with, or furnish them to, the SEC. Information on Cheniere’s website is not incorporated into this consent solicitation/prospectus and is not a part of this consent solicitation/prospectus.

In addition, you may also obtain additional copies of this consent solicitation/prospectus or the documents incorporated by reference into this consent solicitation/prospectus by contacting Cheniere’s consent solicitor, at the address and telephone numbers listed below. You will not be charged for any of these documents that you request.

D. F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, New York 10005

Banks and Brokers call: (212) 269-5550

All others call toll-free: (866) 342-8290

Email: CQH@dfking.com

To obtain timely delivery of these documents prior to the conclusion of the consent process, CQH Shareholders must request the information no later than September 12, 2018. If you request any documents, Cheniere or CQH will mail them to you by first class mail or another equally prompt means.

Cheniere and CQH have not authorized anyone to give any information or make any representation about the Merger, Cheniere or CQH that is different from, or in addition to, the information contained in this consent solicitation/prospectus or in any of the materials that have been incorporated by reference into this consent solicitation/prospectus. Therefore, if anyone distributes any such information, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell or solicitations of offers to exchange or purchase the

securities offered by this consent solicitation/prospectus or the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this consent solicitation/prospectus does not extend to you. The information contained in this consent solicitation/prospectus speaks only as of the date of this consent solicitation/prospectus or, in the case of information in a document incorporated by reference, as of the date of such document, unless the information specifically indicates that another date applies. Cheniere and CQH have both contributed to the information relating to the Merger contained in this consent solicitation/prospectus. All information in this consent solicitation/prospectus concerning Cheniere has been furnished by Cheniere. All information in this consent solicitation/prospectus concerning CQH has been furnished by CQH.

CONSENT SOLICITATION/PROSPECTUS

TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS			1
SUMMARY			6
Information About the Companies			6
Written Consents of CQH Shareholders			7
The Merger and the Merger Agreement			7
Recommendation of the CQH Board			7
Reasons for Approval by the CQH Conflicts Committee			8
Opinion of Jefferies, Financial Advisor to the CQH Conflicts Committee			8
Regulatory Matters			8
Security Ownership of Certain Beneficial Owners and Management/Directors of CQH			9
Conditions			9
Termination			9
Interests of Directors and Executive Officers of CQH in the Merger			10
Comparison of Rights of Cheniere Stockholders and CQH Shareholders			10
Comparison of Cheniere and CQH Market Prices and Implied Value of CQH Common Shares			10
Material U.S. Federal Income Tax Consequences			11
No Dissenters’ or Appraisal Rights			11
Summary of Risk Factors			11
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CHENIERE			14
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CQH			15
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION			16
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE INFORMATION			17
RISK FACTORS			18
Risks Related to the Merger			18
Risks Related to Cheniere Common Stock			23
Risks Relating to Cheniere’s Business			24
Risks Relating to CQH’s Business			24
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS			25
WRITTEN CONSENTS OF CQH SHAREHOLDERS			26
CQH Shareholders Entitled to Consent and Consent Required			26
Approval of the Merger Agreement and the Transactions Contemplated Thereby, Including the Merger			26
Submission of Consents			26
Revocation of Consents			26
Expenses			26
INFORMATION ABOUT THE COMPANIES			27
THE MERGER			28
Transaction Structure			28
Consideration to CQH Shareholders			28
Background of the Merger			28
Recommendation of the CQH Board			35
Reasons for Approval by the CQH Conflicts Committee			35
Opinion of Jefferies, Financial Advisor to the CQH Conflicts Committee			39
Unaudited Financial Projections of Cheniere and CQH			45
Reasons of the Cheniere Board for the Merger			47
Regulatory Matters			47
Interests of Directors and Executive Officers of CQH in the Merger			47

 

i

Indemnification and Insurance			49
Listing of Cheniere Common Stock; Delisting and Deregistration of CQH Common Shares			49
No Dissenters’ or Appraisal Rights			49
No Cheniere Stockholder Approval Required			49
Accounting Treatment of the Merger			49
THE MERGER AGREEMENT			50
Explanatory Note Regarding the Merger Agreement			50
The Merger			50
Closing and Effective Time of the Merger			50
Merger Consideration			51
Exchange Procedures			51
Termination of the Exchange Fund			52
Dividends and Distributions with Respect to Unexchanged CQH Common Shares			53
Lost, Stolen or Destroyed Certificates			53
Withholding Rights			53
Appraisal Rights			53
Adjustments to Prevent Dilution			53
Representations and Warranties			54
Interim Operations			57
Reasonable Best Efforts; Filings; Information Supplied			57
Stock Exchange Listing and Delisting			58
Shareholder Litigation			58
Expenses			58
Indemnification; Directors’ and Officers’ Insurance			58
Dividends and Distributions			59
Conflicts Committee			59
Reorganization Treatment			60
Conditions			60
Termination			62
Modification or Amendment			62
Waiver of Conditions			62
Support Agreement			63
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT/DIRECTORS OF CQH			64
DESCRIPTION OF CHENIERE COMMON STOCK			65
Listing			65
Dividends			65
Fully Paid			65
Voting Rights			65
Other Rights			65
Transfer Agent and Registrar			65
Certain Provisions of the Cheniere Certificate of Incorporation, Cheniere Bylaws and Law			65
Standstill Agreement			67
COMPARISON OF RIGHTS OF CHENIERE STOCKHOLDERS AND CQH SHAREHOLDERS			68
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION			81
Cheniere Market Price and Dividend Information			81
CQH Market Price and Dividend Information			82
Comparison of Cheniere and CQH Market Prices and Implied Value of CQH Common Shares			82
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES			84
Tax Consequences of the Merger			85
Tax Consequences to U.S. Holders of Cheniere Common Stock			86
Tax Consequences to Non-U.S. Holders of Cheniere Common Stock			87

 

ii

NO DISSENTERS’ OR APPRAISAL RIGHTS			89
VALIDITY OF COMMON STOCK			90
LEGAL MATTERS			90
EXPERTS			91
WHERE YOU CAN FIND MORE INFORMATION			92
Cheniere’s Filings			92
CQH’s Filings			93
INDEX TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS			F-1
ANNEX A—Agreement and Plan of Merger, dated as of June 18, 2018			A-1
ANNEX B—Opinion of Jefferies LLC			B-1

 

iii

QUESTIONS AND ANSWERS

Important Information and Risks. The following are brief answers to some questions that you may have regarding the Merger Agreement and the proposed Merger. You should read and consider carefully the remainder of this consent solicitation/prospectus, including the section titled “Risk Factors” beginning on page 18 and the attached Annexes, because the information in this section does not provide all of the information that might be important to you. Additional important information and risk factors are also contained in the documents incorporated by reference into this consent solicitation/prospectus. Please read the section titled “Where You Can Find More Information” beginning on page 92.

 

Q:	What is the proposed transaction?

 

A:

Cheniere and CQH have agreed that Cheniere will acquire CQH by merging CQH with and into Merger Sub, a wholly owned subsidiary of Cheniere, with Merger Sub surviving the Merger, under the terms of the Merger Agreement described in this consent solicitation/prospectus and attached as Annex A to this consent solicitation/prospectus. As a result of the Merger, each outstanding CQH Common Share, other than those owned by Cheniere, will be cancelled and converted into the right to receive 0.4750 shares of Cheniere Common Stock. The 212,953,991 CQH Common Shares owned by Cheniere will be cancelled and will not be converted in the Merger.

The Merger will become effective at the Effective Time.

 

Q:	Why am I receiving these materials?

 

A:

The approval of the Merger Agreement and the Merger by CQH requires the affirmative consent of holders of at least a majority of the outstanding CQH Common Shares. If you are a record holder of outstanding CQH Common Shares as of the Record Date, you may complete, date and sign the enclosed written consent and promptly return it to CQH. The delivery of the Cheniere Written Consent by Cheniere with respect to the CQH Common Shares owned by Cheniere will be sufficient to approve the Merger Agreement and the Merger. This consent solicitation/prospectus contains important information about the Merger Agreement, the Merger and the other actions contemplated thereby, and you should read this consent solicitation/prospectus carefully.

 

Q:	What will happen to CQH as a result of the Merger?

 

A:	As a result of the Merger, CQH will merge with and into Merger Sub, and Merger Sub will survive as a direct wholly owned subsidiary of Cheniere.

 

Q:	What will CQH Shareholders receive in the Merger?

 

A:

If the Merger is completed, CQH Shareholders other than Cheniere will be entitled to receive 0.4750 shares of Cheniere Common Stock in exchange for each CQH Common Share owned (the “Exchange Ratio”). The Exchange Ratio is fixed and will not be adjusted on account of any change in price of either shares of Cheniere Common Stock or CQH Common Shares prior to completion of the Merger. If the Exchange Ratio would result in a CQH Shareholder being entitled to receive a fraction of a share of Cheniere Common Stock, that CQH Shareholder will not receive any fractional share of Cheniere Common Stock. Any CQH Shareholder will be entitled to cash in lieu of receiving any fractional share of Cheniere Common Stock to which such holder would otherwise have been entitled. Cheniere Stockholders will continue to own their existing shares of Cheniere Common Stock. For additional information regarding exchange procedures, please read the section titled “The Merger Agreement—Exchange Procedures” beginning on page 51.

 

1

Q:	Where will shares of Cheniere Common Stock and CQH Common Shares trade after the Merger?

 

A:	Shares of Cheniere Common Stock will continue to trade on the NYSE American under the symbol “LNG.” CQH Common Shares will no longer be publicly traded.

 

Q:	What will Cheniere Stockholders receive in the Merger?

 

A:	Cheniere Stockholders will simply retain the shares of Cheniere Common Stock they currently own. They will not receive any additional shares of Cheniere Common Stock or any other consideration in the Merger.

 

Q:	What will happen to future dividends on my CQH Common Shares?

 

A:

Subject to applicable law and the CQH LLC Agreement, Cheniere and CQH shall coordinate to designate the record date for the regular quarterly cash dividend on the CQH Common Shares that is paid or payable during the calendar quarter ending September 30, 2018 (the “Second Quarter Distribution”) so that the record date for the Second Quarter Distribution precedes the Effective Time. Subject to applicable law, the Second Quarter Distribution will not be less than $0.56 per CQH Common Share without approval of the CQH Conflicts Committee. If the Merger Agreement is terminated, it is expected that CQH dividends would continue, consistent with past practice and in accordance with the terms of the CQH LLC Agreement.

Once the Merger is completed, former CQH Shareholders who surrender their CQH Common Shares in accordance with the Merger Agreement will be eligible, in their capacity as Cheniere Stockholders, to receive dividends declared by the Board of Directors of Cheniere (the “Cheniere Board”) on Cheniere Common Stock, if any, after the Effective Time of the Merger. Cheniere currently does not, and there is no guarantee that the Cheniere Board will, in the future, declare dividends on Cheniere Common Stock.

 

Q:	What CQH Shareholder approval is required to approve the Merger Agreement?

 

A:

The approval of the Merger Agreement and the Merger by CQH requires the affirmative consent of holders of at least a majority of the outstanding CQH Common Shares. Pursuant to the terms of the Support Agreement, Cheniere, which as of August 15, 2018 beneficially owned 212,953,991 CQH Common Shares representing approximately 91.9% of the outstanding CQH Common Shares, has irrevocably agreed to deliver the Cheniere Written Consent within two business days after the effectiveness of the registration statement of which this consent solicitation/prospectus forms a part. The delivery of the Cheniere Written Consent by Cheniere with respect to the CQH Common Shares owned by Cheniere will be sufficient to approve the Merger Agreement and the Merger. Upon the later of 20 business days after this consent solicitation/prospectus is sent to CQH Shareholders and the date on which a sufficient number of consents to approve the Merger Agreement, and the transactions contemplated thereby, have been received, the consent process will conclude. The consent solicitation cannot close until 10 days after the Record Date under the CQH LLC Agreement.

CHENIERE STOCKHOLDERS ARE NOT BEING ASKED FOR A CONSENT OR PROXY AND CHENIERE STOCKHOLDERS ARE REQUESTED NOT TO SEND CHENIERE A CONSENT OR PROXY.

 

Q:	When do you expect the Merger to be completed?

 

A:

Cheniere and CQH are working to complete the Merger as soon as possible. A number of conditions must be satisfied before Cheniere and CQH can complete the Merger. For more information about these conditions, please read the section titled “The Merger Agreement—Conditions” beginning on page 60. Although Cheniere and CQH cannot be sure when all of the conditions to the Merger will be satisfied,

 

2

Cheniere and CQH expect to complete the Merger as soon as practicable following the effectiveness of the registration statement of which this consent solicitation/prospectus forms a part. Assuming timely satisfaction of the necessary closing conditions, Cheniere and CQH currently expect the Closing Date to occur in the third quarter of 2018.

 

Q:	Does the CQH Board recommend that CQH Shareholders approve the Merger Agreement and the Merger?

 

A:	Yes. The CQH Board recommends that CQH Shareholders consent with respect to the Merger Agreement and the Merger.

The CQH Conflicts Committee, acting in good faith, unanimously determined that the Merger upon the terms set forth in the Merger Agreement is fair and reasonable to, and in the best interests of, CQH and the Unaffiliated CQH Shareholders, and has approved the Merger Agreement and the transactions contemplated thereby, including the Merger. This action of the CQH Conflicts Committee constitutes “Special Approval” of the Merger Agreement and the transactions contemplated thereby under the CQH LLC Agreement. The CQH Conflicts Committee recommended that the CQH Board approve the Merger upon the terms set forth in the Merger Agreement. Based upon the recommendation of the CQH Conflicts Committee, the CQH Board unanimously approved the Merger Agreement and the transactions contemplated thereby and determined that the Merger Agreement and the transactions contemplated thereby are fair and reasonable to, and in the best interests of, CQH and the Unaffiliated CQH Shareholders. The CQH Board approved the Merger Agreement and the transactions contemplated thereby, including the Merger, and directed that the Merger Agreement and the transactions contemplated thereby, including the Merger be submitted to CQH Shareholders for approval. The CQH Board recommends that CQH Shareholders consent with respect to the Merger Agreement and the Merger.

 

Q:	How can CQH Shareholders return their written consents with respect to the Merger?

 

A:

If you hold CQH Common Shares as of the close of business on the Record Date and you wish to submit your consent with respect to the Merger, you must fill out the enclosed written consent, date and sign it, and promptly return it to CQH. Once you have completed, dated and signed your written consent, deliver it to CQH by one of the means described in the section titled “Written Consents of CQH Shareholders—Submission of Consents” beginning on page 26. CQH does not intend to hold a meeting of CQH Shareholders to consider the Merger Agreement and the Merger.

 

Q.	Can CQH Shareholders change or revoke their written consents?

 

A:

Yes. If you are a record holder of CQH Common Shares on the Record Date, you may revoke your consent or, if you have previously revoked your consent, submit a new written consent at any time before the later of 20 business days after this consent solicitation/prospectus is sent to CQH Shareholders and the date on which the consents of a sufficient number of CQH Common Shares to approve the Merger Agreement have been delivered to the Corporate Secretary of CQH. However, the delivery of the Cheniere Written Consent by Cheniere with respect to the CQH Common Shares it owns will be sufficient to approve the Merger Agreement and the Merger and Cheniere has irrevocably agreed to deliver the Cheniere Written Consent two business days after the effectiveness of the registration statement of which this consent solicitation/prospectus forms a part. If you wish to change or revoke your consent before that time, you may do so by sending in a new written consent with a later date by one of the means described in the section titled “Written Consents of CQH Shareholders—Submission of Consents” beginning on page 26, or delivering a notice of revocation to the Corporate Secretary of CQH.

 

3

Q:	If my CQH Common Shares are held in “street name” by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee automatically consent for me?

 

A:	No. If you hold your CQH Common Shares in “street name” with a bank, brokerage firm or other nominee, you should follow the instructions provided by your bank, brokerage firm or other nominee.

 

Q:	Should CQH Shareholders tender their CQH Common Shares now?

 

A:

No. After the Merger is completed, CQH Shareholders who hold their CQH Common Shares in certificated or book-entry form will receive written instructions for exchanging their CQH Common Shares. If you own CQH Common Shares in “street name,” each CQH Common Share issued and outstanding immediately prior to the Effective Time (other than CQH Common Shares owned by Cheniere, Merger Sub or any other direct or indirect wholly owned subsidiary of Cheniere, and in each case, not held on behalf of third parties (“Excluded Shares”)) (such CQH Common Shares, the “Eligible Shares”) that you own will be converted into the right to receive 0.4750 shares of validly issued, fully paid and non-assessable Cheniere Common Stock (the “Merger Consideration”) and should be credited to your account in accordance with the policies and procedures of your broker or nominee within a few days following the Closing Date.

 

Q:	What happens if I sell my CQH Common Shares before the consent process concludes?

 

A:

If you transfer your CQH Common Shares after the Record Date but before the consent process concludes, you will, unless special arrangements are made, retain your right to consent with respect to the Merger. However, if you transfer your CQH Common Shares before the consent process concludes, you will not receive the shares of Cheniere Common Stock at the Exchange Ratio for the CQH Common Shares you have transferred.

 

Q:	What percentage of shares of Cheniere Common Stock will current CQH Shareholders own after the successful consummation of the Merger?

 

A:	If the Merger is successfully completed, CQH Shareholders will collectively own approximately 3.5% of the outstanding shares of Cheniere Common Stock.

 

Q:	What are the expected U.S. federal income tax consequences to CQH Shareholders as a result of the transactions contemplated by the Merger Agreement?

 

A:

It is a condition to the completion of the Merger that CQH obtain an opinion of Sullivan & Cromwell LLP (“Sullivan & Cromwell”), satisfactory to the CQH Board, to the effect that the Merger will be treated as a “reorganization” qualifying under Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”). Assuming that the Merger so qualifies, CQH Shareholders will not recognize any gain or loss, and no amount will be included in such holders’ income, as a result of the Merger, except with respect to any cash received in lieu of a fractional share of Cheniere Common Stock. A CQH Shareholder should recognize gain or loss on any cash received in lieu of a fractional share of Cheniere Common Stock, and such gain or loss will be equal to the difference between the amount of cash received in lieu of the fractional share and the portion of such holder’s tax basis in the CQH Common Shares that is allocable to the fractional share.

For additional information, please read the section titled “Material U.S. Federal Income Tax Consequences” beginning on page 84.

 

Q:	Are CQH Shareholders entitled to appraisal rights?

 

A:

No. Under applicable law and the CQH LLC Agreement, CQH Shareholders do not have any right to receive an appraisal of the value of their CQH Common Shares in connection with the Merger. For a further description of appraisal rights, please read the section titled “The Merger Agreement—Appraisal Rights” beginning on page 53.

 

4

Q:	What will happen to CQH if the Merger does not occur?

 

A:	If the Merger does not occur, CQH expects that it will continue to operate its business as it has in the past.

 

Q:	Whom do I call if I have further questions about the Merger?

 

A:	CQH Shareholders who have questions about the procedures for voting their shares, or those who desire additional copies of this consent solicitation/prospectus, should contact:

D. F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, New York 10005

Banks and Brokers call: (212) 269-5550

All others call toll-free: (866) 342-8290

Email: CQH@dfking.com

Or

Cheniere Energy Partners LP Holdings, LLC

700 Milam Street, Suite 1900

Houston, TX 77002

Attention: Investor Relations Department

713-375-5000

corporatesecretary@cheniere.com

 

5

 

6

 

7

 

8

 

9

 

10

 

11

 

12

 

13

 

14

 

15

 

16

 

17

RISK FACTORS

An investment in Cheniere Common Stock involves risks. You should consider carefully the following risk factors, together with all of the other information included in, or incorporated by reference into, this consent solicitation/prospectus before deciding how to vote. In addition, you should read and consider the risks associated with the businesses of Cheniere and CQH. In particular, please read Part I, Item 1. “Business—Competition, Markets and Regulations” and Part I, Item 1A. “Risk Factors,” in the Annual Reports on Form 10-K for the year ended December 31, 2017, for each of Cheniere and CQH, incorporated by reference herein. This consent solicitation/prospectus also contains forward-looking statements that involve risks and uncertainties. Please read the section titled “Special Note Regarding Forward-Looking Statements” beginning on page 25.

Risks Related to the Merger

The Exchange Ratio is fixed and will not be adjusted in the event of any change in either the price of shares of Cheniere Common Stock or the price of CQH Common Shares.

If the Merger is completed, each CQH Common Share outstanding as of immediately prior to the Effective Time of the Merger (other than Excluded Shares) will be converted into the right to receive 0.4750 shares of Cheniere Common Stock. This Exchange Ratio was fixed in the Merger Agreement and will not be adjusted for changes in the market price of either shares of Cheniere Common Stock or CQH Common Shares. Changes in the price of shares of Cheniere Common Stock prior to the Effective Time of the Merger will affect the market value of the Exchange Ratio that CQH Shareholders will receive in the Merger. The market value of Cheniere Common Stock may fluctuate as a result of a variety of factors, including:

 

•

domestic and worldwide supply of and demand for natural gas and corresponding fluctuations in the price of natural gas;

 

•

fluctuations in Cheniere’s quarterly or annual financial results or those of other companies in the industries in which Cheniere operates;

 

•

issuance of additional equity securities which causes further dilution to Cheniere Stockholders;

 

•

sales of a high volume of shares of Cheniere Common Stock by Cheniere Stockholders;

 

•

operating and stock price performance of companies that investors deem comparable to Cheniere;

 

•

events affecting other companies that the market deems comparable to Cheniere;

 

•

changes in government regulation or proposals applicable to Cheniere;

 

•

actual or potential non-performance by any customer or a counterparty under any agreement;

 

•

announcements made by Cheniere or Cheniere’s competitors of significant contracts;

 

•

changes in accounting standards, policies, guidance, interpretations or principles;

 

•

general conditions in the industries in which Cheniere operates;

 

•

general economic conditions;

 

•

the failure of securities analysts to cover Cheniere Common Stock or changes in financial or other estimates by analysts;

 

•

changes in market assessments of the likelihood that the Merger will be completed; and

 

•

other factors described in these “Risk Factors.”

For historical and current market prices of shares of Cheniere Common Stock and CQH Common Shares, please read the section titled “Comparative Per Share Market Price and Dividend Information” beginning on page 81.

 

18

The Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed.

The Merger Agreement is subject to a number of conditions that must be fulfilled in order to complete the Merger. Those conditions include, among others: approval of the Merger Agreement by CQH Shareholders, the accuracy of representations and warranties under the Merger Agreement (subject to the materiality standards set forth in the Merger Agreement) and Cheniere’s and CQH’s performance of their respective obligations under the Merger Agreement in all material respects. These conditions to the closing of the Merger may not be fulfilled in a timely manner or at all, and, accordingly, the Merger may be delayed or may not be completed.

In addition, if the Merger is not completed by December 18, 2018, either Cheniere or CQH may choose not to proceed with the Merger, and the parties can mutually decide to terminate the Merger Agreement at any time. In addition, Cheniere and CQH may elect to terminate the Merger Agreement in certain other circumstances. Please read the section titled “The Merger Agreement—Termination” beginning on page 62.

The opinion rendered to the CQH Conflicts Committee by Jefferies on June 18, 2018 was based on Jefferies’ financial analyses and considered factors such as market and other conditions then in effect, and financial forecasts and other information made available to Jefferies, as of the date of the opinion. As a result, the opinion does not reflect changes in events or circumstances after the date of such opinion. The CQH Conflicts Committee has not requested, and does not expect to request, an updated opinion from Jefferies reflecting changes in circumstances that may have occurred since the signing of the Merger Agreement.

The opinion rendered to the CQH Conflicts Committee by Jefferies on June 18, 2018 was provided in connection with, and at the time of, the evaluation of the Merger and the Merger Agreement by the CQH Conflicts Committee. The opinion was based on the financial analyses performed, which considered market and other conditions then in effect, and financial forecasts and other information made available to Jefferies, as of the date of the opinion, which may have changed, or may change, after the date of the opinion. The CQH Conflicts Committee has not requested an updated opinion as of the date of this consent solicitation/prospectus from Jefferies and does not expect to request an updated opinion prior to completion of the Merger. Changes in the operations and prospects of Cheniere and CQH, general market and economic conditions and other factors that may be beyond the control of Cheniere and CQH, and on which the opinion was based, may have altered the value of Cheniere or CQH or the prices of shares of Cheniere Common Stock or CQH Common Shares since the date of such opinion, or may alter such values and prices by the time the Merger is completed. The opinion does not speak as of any date other than the date of the opinion. For a description of the opinion that Jefferies rendered to the CQH Conflicts Committee, please read the section titled “The Merger—Opinion of Jefferies, Financial Advisor to the CQH Conflicts Committee” beginning on page 39.

Failure to complete, or delay in completing, the Merger could negatively impact the market price of shares of Cheniere Common Stock and CQH Common Shares and financial results of Cheniere and CQH.

The completion of the Merger is subject to certain customary closing conditions, including (i) the registration statement having become effective under the Securities Act, (ii) receipt of approval of the Merger Agreement by written consent of CQH Shareholders holding CQH Common Shares constituting a majority of the outstanding CQH Common Shares entitled to vote, (iii) the Cheniere Common Stock issuable in connection with the Merger having been approved for listing on the NYSE American, subject to official notice of issuance and (iv) the absence of any governmental order prohibiting the consummation of the Merger or the other transactions contemplated by the Merger Agreement. The obligation of each party to consummate the Merger is also conditioned upon the accuracy of the representations and warranties of the other party as of the date of the Merger Agreement and as of the closing (subject to customary materiality qualifiers).

There is no certainty that the various closing conditions will be satisfied and that the necessary approvals will be obtained. If these or other conditions are not satisfied or if there is a delay in the satisfaction of such conditions, then Cheniere and CQH may not be able to complete the Merger timely or at all, and such failure or

 

19

delay may have other adverse consequences. If the Merger is not completed or is delayed, Cheniere and CQH will be subject to a number of risks, including:

 

•

they will not realize the expected benefits of the combined company;

 

•

the market price of the shares of Cheniere Common Stock and CQH Common Shares may decline to the extent that their current market price reflects a market assumption that the Merger will be completed; and

 

•

some costs relating to the Merger, such as investment banking, legal and accounting fees, and financial printing and other related charges, must be paid even if the Merger is not completed.

The assumptions and estimates underlying the financial projections are inherently subject to significant business, economic and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the control of Cheniere and CQH. As a result, the financial projections for Cheniere and CQH may not be realized.

In performing its financial analyses and rendering its opinion regarding the fairness, from a financial point of view, of the Exchange Ratio to CQH and the Unaffiliated CQH Shareholders, Jefferies, the financial advisor to the CQH Conflicts Committee, reviewed and relied on, among other things, financial forecasts for Cheniere and CQH prepared by management. These financial projections speak only as of the date made and will not be updated. These financial projections were not provided with a view to public disclosure, are subject to significant economic, competitive, industry and other uncertainties, and may not be achieved in full, at all or within projected time frames. The financial projections on which the CQH Conflicts Committee’s financial advisor based its opinion may not be realized.

The unaudited pro forma financial statements are presented for illustrative purposes only and may not be an indication of Cheniere’s financial condition or results of operations following the Merger.

The unaudited pro forma financial statements contained in this consent solicitation/prospectus are presented for illustrative purposes only and may not be an indication of Cheniere’s financial condition or results of operations following the Merger for several reasons. The pro forma financial statements have been derived from the historical financial statements of Cheniere and CQH, and adjustments have been made to give effect to the Merger. The actual financial condition and results of operations of the combined entity following the Merger may not be consistent with, or evident from, these unaudited pro forma financial statements. In addition, estimates used in preparing the unaudited pro forma financial statements, including estimates of transaction-related costs in connection with the Merger, may not prove to be accurate, and other factors may affect Cheniere’s financial condition or results of operations following the Merger. Any decline or potential decline in Cheniere’s financial condition or results of operations may cause significant variations in the stock price of Cheniere. Please read the section titled “Unaudited Pro Forma Consolidated Financial Statements” beginning on page F-1.

The CQH LLC Agreement limits the duties of the CQH Board to CQH Shareholders and restricts the remedies available to CQH Shareholders for actions taken by the CQH Board that might otherwise constitute breaches of their duties.

Under the CQH LLC Agreement, whenever a potential conflict of interest arises between a director, officer or any of CQH’s affiliates, on the one hand, and CQH, any of its subsidiaries, or any member of CQH, on the other, any resolution or course of action by such director, officer or affiliate of CQH in respect of such conflict of interest will be permitted and deemed approved by all members of CQH, and will not breach the CQH LLC Agreement or any duty at law or equity, if such resolution or course of action is:

 

•

approved by a majority of the members of the CQH Conflicts Committee acting in good faith (as referred to elsewhere in this consent solicitation/prospectus, such approval constituting “Special Approval” under the CQH LLC Agreement);

 

20

•

approved by the vote of the Unaffiliated CQH Shareholders;

 

•

on terms no less favorable to CQH than those generally being provided to or available from unrelated third parties; or

 

•

fair and reasonable to CQH, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to CQH).

For more information concerning the differing applications of duties to corporations and limited liability companies, please read the section titled “Comparison of Rights of Cheniere Stockholders and CQH Shareholders” beginning on page 68. In light of potential conflicts of interest between Cheniere and the officers and directors of Cheniere, on the one hand, and CQH and the Unaffiliated CQH Shareholders, on the other, the CQH Board submitted the Merger and related matters to the CQH Conflicts Committee for “Special Approval.” The CQH Conflicts Committee reviewed, negotiated and evaluated the Merger Agreement, the Support Agreement, the Merger and related matters on behalf CQH and the Unaffiliated CQH Shareholders. The CQH Conflicts Committee resolved, by a unanimous vote held on June 18, 2018, that the Merger upon the terms set forth in the Merger Agreement is in the best interests of CQH and the Unaffiliated CQH Shareholders; approved the Merger Agreement and the transactions contemplated thereby, including the Merger; and recommended the approval of the Merger upon the terms set forth in the Merger Agreement to the CQH Board.

Cheniere, CQH and their directors and officers may have interests that differ from your interests, and these interests may have influenced their decision to propose and to approve the Merger Agreement and the transactions contemplated thereby, including the Merger.

The nature of the respective businesses of Cheniere and CQH and its affiliates may give rise to conflicts of interest between Cheniere and CQH. The interests of Cheniere, CQH, and their directors and officers may differ from your interests as a result of the relationships among them. A conflict could be perceived to exist, for example, in connection with the number of shares of Cheniere Common Stock offered as the Merger Consideration, particularly where four of the seven directors on the CQH Board are senior or executive officers of Cheniere.

Furthermore, the CQH LLC Agreement provides that, except as explicitly set forth in the CQH LLC Agreement, no director of the CQH Board has any duties (including fiduciary duties) to CQH or any member of CQH, and the resolution or course of action in respect of any actual or potential conflict of interest will not constitute a breach of the CQH LLC Agreement, or of any duty existing at law, in equity or otherwise, if such resolution or course of action is approved by a majority of the members of the CQH Conflicts Committee acting in good faith.

In addition, certain executive officers of Cheniere are also directors and executive officers of CQH. The following executive officers hold positions at both Cheniere and CQH:

 

Officer		Cheniere		CQH
Jack A. Fusco		President and Chief Executive Officer, Director		President and Chief Executive Officer, Chairman of Board of Directors
Anatol Feygin		Executive Vice President and Chief Commercial Officer		Executive Vice President and Chief Commercial Officer, Director
Doug Shanda		Senior Vice President, Operations		Senior Vice President, Operations, Director
Michael J. Wortley		Executive Vice President and Chief Financial Officer		Executive Vice President, Chief Financial Officer, Director

 

21

In considering the recommendation of the CQH Board to approve the Merger proposal, you should consider that the directors and executive officers of Cheniere and CQH may have other interests that differ from, or are in addition to, the interests of CQH Shareholders generally. These interests include the following:

 

•

All of the executive officers of CQH are also executive officers of Cheniere and are expected to continue to serve as executive officers of Cheniere following the Merger;

 

•

Four of the seven directors of CQH are also executive officers of Cheniere, and one of these four directors, Jack Fusco, also serves as a director on the Cheniere Board. Mr. Fusco is expected to continue to serve as a director on the Cheniere Board following the Merger;

 

•

Each of the individuals who serves as an executive officer and director of CQH owns shares of Cheniere Common Stock representing less than 1% of the shares of Cheniere Common Stock outstanding as of August 15, 2018;

 

•

Certain other non-management directors of CQH own shares of Cheniere Common Stock and one non-management director of CQH also owns CQH Common Shares. The directors that own shares of Cheniere Common Stock own shares representing less than 1% of the shares of Cheniere Common Stock outstanding as of August 15, 2018; and

 

•

All of the directors and executive officers of CQH have the right to indemnification under the organizational documents of CQH, the CQH LLC Agreement and the Merger Agreement. In addition, all of the directors of Cheniere and all of the officers of Cheniere have the right to indemnification under the organizational documents of Cheniere and indemnification agreements with Cheniere.

The members of the CQH Conflicts Committee and CQH Board were aware of and considered these interests, among other matters, when they approved the Merger Agreement and when the CQH Board recommended that CQH Shareholders approve the Merger. These interests are described in more detail in the section titled “The Merger—Interests of Directors and Executive Officers of CQH in the Merger” beginning on page 47.

Because Cheniere owns approximately 91.9% of the outstanding CQH Common Shares and has agreed to deliver the Written Consent approving the Merger, approval of the Merger is assured regardless of whether the Unaffiliated CQH Shareholders consent to the Merger.

Regardless of whether the Unaffiliated CQH Shareholders consent to the Merger, the Merger receiving approval is assured because Cheniere, which owns approximately 91.9% of the outstanding CQH Common Shares as of August 15, 2018, has agreed to approve the Merger on behalf of all the CQH Common Shares Cheniere beneficially owns.

CQH does not have the ability to enter into certain alternatives to the Merger that are not approved by Cheniere.

As of August 15, 2018, Cheniere owns approximately 91.9% of the outstanding CQH Common Shares. Accordingly, certain alternative transactions to the Merger entered into by CQH would need to be approved by Cheniere. Because Cheniere controls the voting of approximately 91.9% of CQH Common Shares, Cheniere can effectively block CQH from entering into alternative transactions to the Merger that require the approval of CQH Shareholders that Cheniere does not support, which could discourage third parties that may have an interest in acquiring all or a significant part of CQH from considering or proposing that acquisition.

Cheniere and CQH will be subject to certain operating restrictions until the completion of the Merger.

The Merger Agreement generally restricts CQH, without Cheniere’s consent, or Cheniere, without CQH’s consent, from taking specified actions until the Merger occurs or the Merger Agreement terminates. These

 

22

restrictions may prevent CQH or Cheniere from taking actions that each respectively might otherwise consider beneficial. Please read the section titled “The Merger Agreement—Interim Operations” beginning on page 57.

Risks Related to Cheniere Common Stock

Shares of Cheniere Common Stock to be received by CQH Shareholders as a result of the Merger have different rights as compared to CQH Common Shares.

Following completion of the Merger, CQH Shareholders will no longer hold CQH Common Shares, but will instead hold shares of Cheniere Stock. There are important differences between the rights of CQH Shareholders and Cheniere Stockholders. Ownership interests in a limited liability company are fundamentally different from ownership interests in a Delaware corporation. CQH Shareholders will own shares of Cheniere Common Stock following the Merger, and their rights associated with shares of Cheniere Common Stock will be governed by the Cheniere Certificate of Incorporation and the General Corporation Law of the State of Delaware (“DGCL”), which differs in many respects from the CQH LLC Agreement and Delaware Limited Liability Company Act (“DLLCA”). Please read the section titled “Comparison of Rights of Cheniere Stockholders and CQH Shareholders” beginning on page 68 for a discussion of the different rights associated with shares of Cheniere Common Stock and CQH Common Shares.

Cheniere currently does not, and in the future may not, pay any cash dividends to Cheniere Stockholders, and Cheniere’s ability to declare and pay cash dividends to Cheniere Stockholders, if any, in the future will depend on various factors, many of which are beyond Cheniere’s control.

Under the DGCL, the Cheniere Board may not authorize payment of a dividend unless it is either (i) paid out of surplus, as calculated in accordance with the DGCL or (ii) if Cheniere does not have a surplus, paid out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Unlike CQH, Cheniere is not required to declare dividends of its available cash to stockholders. Cheniere has not paid cash dividends on Cheniere Common Stock in the past and the Cheniere Board may not declare dividends in the future. Should the Cheniere Board declare dividends on the Cheniere Common Stock in the future, the dividend yield of the Cheniere Common Stock may only be a fraction of the historical or projected dividend yield of the CQH Common Shares. Any payment of future dividends will be at the discretion of the Cheniere Board and will depend on Cheniere’s earnings, financial condition, capital requirements, level of indebtedness, legal, regulatory and contractual restrictions applying to the payment of dividends and other considerations that the Cheniere Board deems relevant. For more information regarding Cheniere’s earnings, financial condition, capital requirements, level of indebtedness or legal, regulatory or contractual restrictions, please read Cheniere’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, incorporated by reference herein.

Some provisions of the Cheniere Certificate of Incorporation, Cheniere Bylaws and Delaware law may inhibit a takeover, which could limit the price investors might be willing to pay in the future for shares of Cheniere Common Stock.

Some provisions in the Cheniere Certificate of Incorporation and the Cheniere Bylaws may have the effect of delaying, discouraging or preventing an acquisition of Cheniere or a merger in which Cheniere is not the surviving company and may otherwise prevent or slow changes in the Cheniere Board and management. For example, certain Cheniere Certificate of Incorporation and Cheniere Bylaws provisions can only be amended by the affirmative vote of two-thirds of Cheniere Stockholders. In addition, because Cheniere is incorporated in Delaware and has not opted out of the provision, it is governed by the provisions of Section 203 of the DGCL, which prohibits certain business combinations between it and “interested stockholders” (generally a stockholder owning or controlling 15% of more of the outstanding voting stock of a corporation) for three years following the time at which such stockholder became an interested stockholder unless specified conditions are met. These provisions could discourage an acquisition of Cheniere or other change in control transactions, whether or not it is desired or beneficial to Cheniere Stockholders, and thereby negatively affect the price that investors might be

 

23

willing to pay in the future for shares of Cheniere Common Stock. In addition, to the extent that these provisions discourage an acquisition of Cheniere or other change in control transaction, they could deprive stockholders of opportunities to realize takeover premiums for their shares of Cheniere Common Stock. Please read the section titled “Description of Cheniere Common Stock” beginning on page 65 for a description of Cheniere Common Stock.

There may be future dilution of Cheniere Common Stock, which could adversely affect the market price of shares of Cheniere Common Stock.

The Merger Agreement does not restrict Cheniere’s ability to issue additional shares of Cheniere Common Stock prior to or following the Effective Time. In the future, Cheniere may issue shares of Cheniere Common Stock to raise cash for LNG projects, operations, acquisitions or other purposes. Cheniere may also acquire interests in other companies by using a combination of cash and shares of Cheniere Common Stock or just shares of Cheniere Common Stock. Cheniere has issued securities convertible into, or exchangeable for, or that represent the right to receive, shares of Cheniere Common Stock and may do so again in the future. Any of these events may dilute the ownership interests of current Cheniere Stockholders in Cheniere, reduce Cheniere’s earnings per share and have an adverse effect on the price of shares of Cheniere Common Stock.

Sales of a substantial amount of shares of Cheniere Common Stock in the public market could adversely affect the market price of shares of Cheniere Common Stock.

Sales of a substantial amount of shares of Cheniere Common Stock in the public market, or the perception that these sales may occur, could reduce the market price of shares of Cheniere Common Stock.

Risks Relating to Cheniere’s Business

You should read and consider risk factors specific to Cheniere businesses that will also affect the combined company after the completion of the Merger. These risks are described in Part I, Item 1A of Cheniere’s Annual Report on Form 10-K for the year ended December 31, 2017, and in other documents that are incorporated by reference herein. Please read the section titled “Where You Can Find More Information” beginning on page 92 for the location of information incorporated by reference in this consent solicitation/prospectus.

Risks Relating to CQH’s Business

You should read and consider risk factors specific to CQH’s businesses that will also affect the combined company after the completion of the Merger. These risks are described in Part I, Item 1A of CQH’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, and in other documents that are incorporated by reference herein. Please read the section titled “Where You Can Find More Information” beginning on page 92 for the location of information incorporated by reference in this consent solicitation/prospectus.

 

24

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This consent solicitation/prospectus and the documents Cheniere and CQH have incorporated herein by reference include statements that constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. In particular, statements using words such as “may,” “will,” “could,” “should,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “continue,” the negative of such terms or other comparable terminology generally involve forward-looking statements.

The forward-looking statements contained herein (including statements regarding the transactions contemplated by the Merger Agreement, including the Merger, and its effects, benefits and costs, savings, opinions, forecasts, projections, expected timetable for completion, expected dividends or distributions, and any other statements regarding Cheniere’s and CQH’s future expectations, beliefs, plans, objectives, financial conditions, assumptions or future events or performance that are not statements of historical fact) are largely based on Cheniere’s expectations, which reflect estimates and assumptions made by Cheniere’s management. These estimates and assumptions reflect Cheniere’s best judgment based on currently known market conditions and other factors. Although we believe that such estimates are reasonable, they are inherently uncertain and involve a number of risks and uncertainties beyond Cheniere’s control. In addition, assumptions may prove to be inaccurate. We caution that the forward-looking statements contained herein are not guarantees of future performance and that such statements may not be realized or the forward-looking statements or events may not occur. Actual results may differ materially from those anticipated or implied in forward-looking statements as a result of numerous factors, including, but not limited to, the risks and uncertainties set forth under the section titled “Risk Factors,” beginning on page 18, as well as, among others:

 

•

the possibility that the Merger, and the transactions contemplated thereby, are not consummated in a timely manner or at all;

 

•

the timing to consummate the Merger, and the transactions contemplated thereby;

 

•

Cheniere’s future operating results, cash flow, liquidity, debt and financial position;

 

•

changes in the demand for and price of oil, gas and LNG and competition in the oil, gas and LNG industry;

 

•

economic, political and other factors that could negatively affect the development, construction and operation of LNG facilities;

 

•

Cheniere’s business and financial strategic plans, objectives, expectations and intentions for future operations;

 

•

the risk that the combined company may be unable to achieve cost-cutting synergies or that it may take longer than expected to achieve those synergies; and

 

•

other businesses, financial, operational and legal risks and uncertainties detailed from time to time in Cheniere’s and CQH’s SEC filings, including but not limited to those discussed under Item 1A, “Risk Factors,” in Cheniere’s Annual Report on Form 10-K for the year ended December 31, 2017 and CQH’s Annual Report on Form 10-K for the year ended December 31, 2017.

Cheniere and CQH caution that the foregoing list of factors is not exclusive. Additional information concerning these and other risk factors is contained in Cheniere’s and CQH’s most recently filed Annual Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K, and other SEC filings. In addition, Cheniere and CQH may be subject to currently unforeseen risks that may have a materially adverse effect on them. All subsequent written and oral forward-looking statements concerning Cheniere, CQH, the proposed Merger or other matters and attributable to CQH or Cheniere or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above. These forward-looking statements speak only as of the date made, and other than as required by law, neither Cheniere nor CQH undertake any obligation to update or revise any forward-looking statement or provide reasons why actual results may differ, whether as a result of new information, future events or otherwise.

 

25

WRITTEN CONSENTS OF CQH SHAREHOLDERS

CQH Shareholders Entitled to Consent and Consent Required

Only CQH Shareholders of record at the close of business on the Record Date will be notified of and be entitled to execute and deliver a written consent with respect to the approval of the Merger Agreement and the Merger. The approval of the Merger Agreement and the Merger by CQH requires the affirmative consent of holders of at least a majority of the issued and outstanding CQH Common Shares.

Approval of the Merger Agreement and the Transactions Contemplated Thereby, Including the Merger

Pursuant to the terms of the Support Agreement, Cheniere, which as of August 15, 2018 beneficially owned 212,953,991 CQH Common Shares representing approximately 91.9% of the outstanding CQH Common Shares, has irrevocably agreed to deliver the Cheniere Written Consent within two business days after the effectiveness of the registration statement of which this consent solicitation/prospectus forms a part. The delivery of the Cheniere Written Consent by Cheniere with respect to the CQH Common Shares it owns will be sufficient to approve the Merger Agreement and the Merger.

Submission of Consents

CQH Shareholders may consent to the approval of the Merger Agreement and the Merger with respect to their CQH Common Shares by completing, dating and signing the written consent furnished with this consent solicitation/prospectus and returning it to CQH.

If you hold CQH Common Shares as of the Record Date and you wish to give your written consent, you must fill out the enclosed written consent, date and sign it, and promptly return it to CQH. Once you have completed, dated and signed the written consent, you may deliver it to CQH by faxing it to Cheniere Energy Partners LP Holdings, LLC, Attention: Corporate Secretary, at 713-375-3600, by emailing a .pdf copy of your written consent to corporatesecretary@cheniere.com or by mailing your written consent to Cheniere Energy Partners LP Holdings, LLC at 700 Milam Street, Suite 1900, Houston, Texas 77002, Attention: Corporate Secretary. If you do not return your written consent, it will have the same effect as a vote against the approval of the Merger Agreement and Merger.

Upon the later of 20 business days after this consent solicitation/prospectus is sent to CQH shareholders and the date on which a sufficient number of consents to approve the Merger Agreement, and the transactions contemplated thereby, have been received, the consent process will conclude. The delivery of the Cheniere Written Consent with respect to the CQH Common Shares beneficially owned by Cheniere will be sufficient to approve the Merger Agreement and the Merger. Cheniere has irrevocably agreed to deliver the Cheniere Written Consent within two business days after the effectiveness of the registration statement of which this consent solicitation/prospectus forms a part. The consent solicitation cannot close until 10 days after the Record Date under the CQH LLC Agreement.

Revocation of Consents

Your consent may be revoked at any time before the later of 20 business days after this consent solicitation/prospectus is sent to CQH Shareholders and the date on which the consents of a sufficient number of CQH Common Shares to approve the Merger Agreement and the Merger have been delivered to the Corporate Secretary of CQH. If you wish to revoke a previously given consent before that time, you may do so by faxing such revocation to Cheniere Energy Partners LP Holdings, LLC, Attention: Corporate Secretary, at 713-375-3600, by emailing a .pdf copy of your written consent to corporatesecretary@cheniere.com or by mailing your written consent to Cheniere Energy Partners LP Holdings, LLC at 700 Milam Street, Suite 1900, Houston, Texas 77002, Attention: Corporate Secretary.

Expenses

The expense of preparing, printing and mailing these consent materials is being borne by Cheniere.

 

26

INFORMATION ABOUT THE COMPANIES

Cheniere Energy, Inc.

700 Milam Street, Suite 1900

Houston, TX 77002

Phone: (713) 375-5000

Cheniere Energy, Inc., a Delaware corporation, is a Houston-based energy company primarily engaged in LNG-related businesses. Cheniere’s vision is to provide clean, secure and affordable energy to the world, while responsibly delivering a reliable, competitive and integrated source of LNG, in a safe and rewarding work environment. Cheniere owns and operates the Sabine Pass LNG terminal in Louisiana through Cheniere’s ownership interest in and management agreements with Cheniere Partners, which is a publicly traded limited partnership that Cheniere created in 2007. As of August 15, 2018, Cheniere owned 100% of the general partner interest in Cheniere Partners and approximately 91.9% of CQH, which owns a 48.6% limited partner interest in Cheniere Partners. Cheniere is currently developing and constructing two natural gas liquefaction and export facilities. The liquefaction of natural gas into LNG allows it to be shipped economically from areas of the world where natural gas is abundant and inexpensive to produce to other areas where natural gas demand and infrastructure exist to economically justify the use of LNG.

Our corporate headquarters are located at 700 Milam Street, Suite 1900, Houston, Texas 77002. Cheniere’s phone number is (713) 375-5000, and Cheniere’s website is accessed at http://www.cheniere.com. Information on Cheniere’s website is not incorporated into this consent solicitation/prospectus or Cheniere’s other securities filings and is not a part of this consent solicitation/prospectus.

Cheniere Energy Partners LP Holdings, LLC

700 Milam Street, Suite 1900

Houston, TX 77002

Phone: (713) 375-5000

CQH is a publicly traded Delaware limited liability company formed by Cheniere in 2013 to hold its limited partner interests in Cheniere Partners, a publicly traded limited partnership. CQH’s only business consists of owning and holding Cheniere Partners Units, along with cash or other property that CQH receives as distributions in respect of such units, and, accordingly, CQH’s consolidated operating results and financial condition are dependent on the performance of Cheniere Partners. As of August 15, 2018, CQH owned a 48.6% limited partner interest in Cheniere Partners.

Each of the executive officers of CQH is also an executive officer of Cheniere. For information about the common executive officers of Cheniere and CQH and the resulting interests of CQH’s directors and executive officers in the Merger, please read “The Merger—Interests of Directors and Executive Officers of CQH in the Merger” on page 47.

Merger Sub

c/o Cheniere Energy, Inc.

700 Milam Street, Suite 1900

Houston, TX 77002

Phone: (713) 375-5000

Merger Sub, whose legal name is Columbia Acquisition Sub LLC, is a direct, wholly owned subsidiary of Cheniere. Upon the completion of the Merger, Merger Sub will continue to exist as a wholly owned subsidiary of Cheniere. Merger Sub was formed in Delaware on June 15, 2018 for the sole purpose of effecting the Merger.

 

27

THE MERGER

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this consent solicitation/prospectus as Annex A and incorporated by reference herein in its entirety. You should read the entire Merger Agreement carefully as it is the legal document that governs the Merger.

Transaction Structure

The Merger Agreement provides that, upon the terms and conditions in the Merger Agreement, and in accordance with the CQH LLC Agreement and the DLLCA, at the Effective Time of the Merger, CQH will merge with and into Merger Sub, with Merger Sub being the surviving entity of the Merger (“Surviving Entity”).

Consideration to CQH Shareholders

As a result of the Merger, each outstanding CQH Common Share, other than those owned by Cheniere, will be cancelled and converted into the right to receive 0.4750 shares of Cheniere Common Stock. The 212,953,991 CQH Common Shares owned by Cheniere will be cancelled and will not be converted in the Merger.

No fractional shares of Cheniere Common Stock will be issued upon the conversion of Eligible Shares. Any holder of Eligible Shares otherwise entitled to receive a fractional share of Cheniere Common Stock will be entitled to receive a cash payment, without interest, rounded to the nearest cent, equal to the product of the aggregated amount of the fractional share interest in shares of Cheniere Common Stock to which such holder would be entitled and an amount equal to the average of the volume weighted average price per share of Cheniere Common Stock on the NYSE American (as reported by Bloomberg L.P. or, if not reported therein, in another authoritative source mutually selected by Cheniere and CQH) on each of the ten consecutive trading days ending with the complete trading day immediately prior to the Effective Time.

Background of the Merger

The Cheniere Board and senior management regularly review and assess the operations, performance, prospects and strategic directions of Cheniere as part of its ongoing efforts to strengthen its business and enhance shareholder value. In connection with these ongoing efforts, the Cheniere Board has periodically discussed with Cheniere management various potential strategic opportunities with respect to simplifying Cheniere’s corporate structure, including with respect to Cheniere and its affiliates (the “Cheniere group”), including CQH and Cheniere Partners.

On August 12, 2016, Cheniere filed with the SEC Amendment No. 3 to the Schedule 13D filed by Cheniere with the SEC on December 20, 2013 (the “Schedule 13D”). Cheniere disclosed in Amendment No. 3 to the Schedule 13D that as part of its ongoing evaluation of its investment in CQH and investment alternatives, including the consolidation or acquisition of assets, Cheniere may formulate plans or proposals with respect to such matters, and hold discussions with or make formal proposals to the CQH Board, other CQH Shareholders or other third parties regarding such matters.

On August 29, 2016, at a meeting of the Cheniere Board, Cheniere management reviewed with the Cheniere Board the potential acquisition by Cheniere of CQH in order to reduce the structural complexity of the Cheniere group, enable capital rationalization and enhance cash flows to Cheniere. At the meeting, the Cheniere Board also authorized management of Cheniere to approach CQH with respect to a potential strategic transaction. Following such meeting, Cheniere management informed the independent directors of the CQH Board (Messrs. Gross, Kobiashvili and Turkleson) about the possibility of a proposal being made to CQH with respect to a potential strategic transaction.

On September 1, 2016, Messrs. Gross, Kobiashvili and Turkleson interviewed Richards, Layton & Finger, PA (“Richards Layton”) to assist in connection with their consideration of a potential strategic transaction.

 

28

Following such interview, Messrs. Gross, Kobiashvili and Turkleson determined that Richards Layton had the requisite experience and qualifications to provide high-quality legal advice to the CQH Conflicts Committee, when constituted, in connection with a potential strategic transaction and determined to engage Richards Layton as its legal advisor.

On September 12, 2016, Messrs. Gross, Kobiashvili and Turkleson held a meeting with representatives of Richards Layton to interview potential financial advisors to provide analysis and an opinion to, when constituted, the CQH Conflicts Committee, in connection with consideration of a potential strategic transaction. In addition, Richards Layton advised Messrs. Gross, Kobiashvili and Turkleson of their duties and obligations with respect to a potential strategic transaction.

On September 17, 2016, Messrs. Gross, Kobiashvili and Turkleson held a meeting with representatives of Richards Layton. Messrs. Gross, Kobiashvili and Turkleson discussed, among other things, the financial advisor interviews held on September 12, 2016 and the potential process for considering a potential strategic transaction.

On September 23, 2016, Messrs. Gross, Kobiashvili and Turkleson held a meeting with representatives of Richards Layton. Messrs. Gross, Kobiashvili and Turkleson had further discussions regarding the potential financial advisor interviews, the independence of the potential financial advisors and the fees requested by the potential advisors, determined that Jefferies was independent and had the requisite experience and qualifications to provide high quality financial advice to the CQH Conflicts Committee, when constituted, and determined to engage Jefferies as its financial advisor in connection with a potential strategic transaction.

On September 29, 2016, representatives of Cheniere delivered a proposal (the “First Merger Proposal”) to the CQH Board, pursuant to which Cheniere would acquire the CQH Common Shares not already owned by Cheniere in a stock-for-share exchange at an exchange ratio of 0.5049 shares of Cheniere Common Stock for each issued and outstanding publicly held CQH Common Share. On September 29, 2016, Cheniere disclosed and included the First Merger Proposal as an exhibit to Amendment No. 4 to the Schedule 13D, which was filed with the SEC on such date.

On September 30, 2016, the CQH Board formally constituted the CQH Conflicts Committee (consisting of Messrs. Gross, Kobiashvili and Turkleson) and authorized the CQH Conflicts Committee to (i) explore, participate in discussions with, or otherwise assist or facilitate proposals to, Cheniere relating to the First Merger Proposal, (ii) review and revise submissions of any proposal in respect of the First Merger Proposal, (iii) review, evaluate and, as appropriate, negotiate the terms and conditions of the First Merger Proposal, (iv) determine whether the First Merger Proposal is fair and reasonable to, and in the best interests of, CQH and the Unaffiliated CQH Shareholders, (v) grant or withhold “Special Approval” (as defined in the CQH LLC Agreement) of the First Merger Proposal, (vi) make a recommendation to the CQH Board with respect to the First Merger Proposal and (vii) do all things that may, in the judgment of its members, be deemed necessary, appropriate or advisable to assist the CQH Conflicts Committee in carrying out its responsibilities with respect to the First Merger Proposal.

On September 30, 2016, representatives of the CQH Conflicts Committee began to conduct legal, financial and other due diligence on Cheniere.

On October 7, 2016, the CQH Conflicts Committee executed an engagement letter with Jefferies.

Throughout October and November 2016, the CQH Conflicts Committee and its representatives held a series of meetings to discuss the First Merger Proposal. Throughout the process of considering the First Merger Proposal, the CQH Conflicts Committee received and considered feedback provided by CQH Shareholders. During this time period, representatives of the CQH Conflicts Committee communicated a counterproposal to the initial proposed exchange ratio to Cheniere and Sullivan & Cromwell and Richards Layton exchanged drafts of the merger agreement.

Following further discussions and negotiations between the CQH Conflicts Committee and Cheniere, on November 9, 2016, Cheniere increased its offer to an exchange ratio of 0.5400 shares of Cheniere Common Stock for each issued and outstanding publicly held CQH Common Share (the “Improved Offer”).

 

29

Following receipt of the Improved Offer, the CQH Conflicts Committee and its representatives held meetings to discuss the Improved Offer and the CQH Conflicts Committee authorized a counterproposal to the Improved Offer.

On November 14, 2016, Jefferies communicated to Cheniere the CQH Conflicts Committee’s counterproposal to the Improved Offer, after which discussions between Cheniere and the CQH Conflicts Committee reached an impasse.

On December 8, 2016, a representative of Cheniere informed a representative of the CQH Conflicts Committee that Cheniere did not believe that agreement on an acceptable exchange ratio could be reached with respect to the First Merger Proposal.

On December 9, 2016, Cheniere publicly disclosed the cessation of its discussions with CQH and the CQH Conflicts Committee relating to the First Merger Proposal on Amendment No. 5 to the Schedule 13D, filed with the SEC on such date. Amendment No. 5 to the Schedule 13D stated in part that, in the future, Cheniere may purchase additional CQH Common Shares in the open market, in privately negotiated transactions or otherwise, and/or resume discussions with the CQH Conflicts Committee regarding the First Merger Proposal, or in one or more transactions, seek to consolidate assets held by Cheniere and its affiliates, including the assets owned by CQH.

On December 12, 2016, Cheniere was approached by certain funds affiliated with Carlson Capital LP to acquire certain CQH Common Shares held by such funds. On December 16, 2016, Cheniere entered into a share purchase and exchange agreement with certain funds affiliated with Carlson Capital LP to acquire 925,000 CQH Common Shares at an exchange ratio of 0.5205 shares of Cheniere Common Stock for each CQH Common Share. Following such purchase and exchange, Cheniere held 186,525,000 CQH Common Shares, representing approximately 80.5% of the CQH Common Shares then issued and outstanding.

On December 12, 2016, Cheniere was approached by Falcon Edge Global Master Fund, LP to acquire certain CQH Common Shares held by such entity. On December 16, 2016, Cheniere entered into a share purchase and exchange agreement with Falcon Edge Global Master Fund, LP, to acquire 2,327,800 CQH Common Shares, at an exchange ratio of 0.5205 shares of Cheniere Common Stock for each CQH Common Share. Following such purchase and exchange, Cheniere held 188,852,800 CQH Common Shares, representing approximately 81.5% of the CQH Common Shares then issued and outstanding.

On December 20, 2016, Cheniere publicly disclosed the purchase and exchange agreements with certain funds affiliated with Carlson Capital LP and Falcon Edge Global Master Fund, LP on Amendment No. 6 to the Schedule 13D, filed with the SEC on such date.

On December 20, 2016, Cheniere was approached by certain funds affiliated with Pennant Capital Management, LLC to acquire certain CQH Common Shares held by such funds. On December 20, 2016, Cheniere entered into a share purchase and exchange agreement with certain funds affiliated with Pennant Capital Management, LLC to acquire 2,532,361 CQH Common Shares at an exchange ratio of 0.5205 shares of Cheniere Common Stock for each CQH Common Share. Following such purchase and exchange, Cheniere held 191,385,161 CQH Common Shares, representing approximately 82.6% of the CQH Common Shares then issued and outstanding.

On December 22, 2016, Cheniere publicly disclosed the purchase and exchange agreement with certain funds affiliated with Pennant Capital Management, LLC on Amendment No. 7 to the Schedule 13D, filed with the SEC on such date.

On February 15, 2017, Mr. Turkleson resigned as a member of the CQH Board, effective February 27, 2017, and Jim Deidiker was appointed to the CQH Board, effective February 27, 2017.

 

30

On February 28, 2017, Cheniere was approached by Pacific Capital Management, LLC to acquire certain CQH Common Shares held by such entity. On February 28, 2017, Cheniere entered into a share purchase and exchange agreement with Pacific Capital Management, LLC to acquire 115,348 CQH Common Shares at an exchange ratio of 0.5125 shares of Cheniere Common Stock for each CQH Common Share. Following such purchase and exchange, Cheniere held 191,500,509 CQH Common Shares, representing approximately 82.7% of the CQH Common Shares then issued and outstanding.

On April 26, 2018, Cheniere was approached by certain funds affiliated with Zimmer Partners, LP to acquire certain CQH Common Shares held by such entity. On April 27, 2018, Cheniere entered into a share purchase and exchange agreement to acquire 11,987,346 CQH Common Shares, at an exchange ratio of .4800 shares of Cheniere Common Stock for each CQH Common Share. Following such purchase and exchange, Cheniere held 203,487,855 CQH Common Shares, representing approximately 87.8% of the CQH Common Shares then issued and outstanding.

On May 1, 2018 Cheniere publicly disclosed the purchase and exchange agreements with Pacific Capital Management, LLC and certain funds affiliated with Zimmer Partners, LP on Amendment No. 8 to the Schedule 13D, filed with the SEC on such date.

On May 2, 2018, Cheniere was approached by Adage Capital Partners LP to acquire certain CQH Common Shares held by such entity. On May 2, 2018, Cheniere entered into a share purchase and exchange agreement to acquire 3,436,428 CQH Common Shares, at an exchange ratio of 0.4780 shares of Cheniere Common Stock for each CQH Common Share. Following such purchase and exchange, Cheniere held 206,924,283 CQH Common Shares, representing approximately 89.3% of the CQH Common Shares then issued and outstanding.

On May 3, 2018 Cheniere publicly disclosed the purchase and exchange agreement with Adage Capital Partners LP on Amendment No. 9 to the Schedule 13D, filed with the SEC on such date.

On May 3, 2018, Cheniere was approached by Everett Opportunities Master Fund LP to acquire certain CQH Common Shares held by such entity. On May 3, 2018, Cheniere entered into a share purchase and exchange agreement to acquire 1,323,102 CQH Common Shares, at an exchange ratio of 0.4780 shares of Cheniere Common Stock for each CQH Common Share. Following such purchase and exchange, Cheniere held 208,247,385 CQH Common Shares, representing approximately 89.9% of the CQH Common Shares then issued and outstanding.

On May 3, 2018, Cheniere was approached by certain funds affiliated with Anchorage Capital Group, L.L.C. to acquire certain CQH Common Shares held by such entity. On May 3, 2018, Cheniere entered into a share purchase and exchange agreement to acquire 4,706,606 CQH Common Shares, at an exchange ratio of 0.4780 shares of Cheniere Common Stock for each CQH Common Share. Following such purchase and exchange, Cheniere held 212,953,991 CQH Common Shares, representing approximately 91.9% of the CQH Common Shares then issued and outstanding.

On May 4, 2018 Cheniere publicly disclosed the purchase and exchange agreements with Everett Opportunities Master Fund LP and certain funds affiliated with Anchorage Capital Group, L.L.C. on Amendment No. 10 to the Schedule 13D, filed with the SEC on such date.

On May 16, 2018, at a meeting of the Cheniere Board, Cheniere management reviewed with the Cheniere Board the potential acquisition by Cheniere of CQH in order to reduce the structural complexity of the Cheniere group, enable capital rationalization and enhance cash flows to Cheniere. At the meeting, the Cheniere Board also authorized management of Cheniere to approach CQH with respect to a potential strategic transaction.

On May 16, 2018, representatives of Cheniere delivered a proposal (the “Second Merger Proposal”) to the CQH Board, pursuant to which Cheniere would acquire the CQH Common Shares not already owned by

 

31

Cheniere in a stock-for-share exchange at an exchange ratio of 0.4500 shares of Cheniere Common Stock for each issued and outstanding publicly held CQH Common Share. On May 17, 2018, Cheniere disclosed and included the Second Merger Proposal as an exhibit to Amendment No. 11 to the Schedule 13D, which was filed with the SEC on such date.

On May 17, 2018, the independent directors of the CQH Board (consisting of Messrs. Deidiker, Gross and Kobiashvili) held a meeting with representatives of Richards Layton to discuss the Second Merger Proposal. Messrs. Deidiker, Gross and Kobiashvili held a discussion regarding the process for considering the Second Merger Proposal and the potential engagement of an independent financial advisor. Messrs. Gross and Kobiashvili, who had been members of the CQH Conflicts Committee during the negotiation of the First Merger Proposal, agreed that Jefferies had provided high-quality financial advice and analysis to the CQH Conflicts Committee, and Messrs. Deidiker, Gross and Kobiashvili decided to interview Jefferies to provide analysis and an opinion to the CQH Conflicts Committee, when constituted, in connection with the Second Merger Proposal. Messrs. Deidiker, Gross and Kobiashvili also had preliminary discussions regarding the Second Merger Proposal and Cheniere’s ownership of more than 90% of the total outstanding CQH Common Shares, which resulted in Cheniere having the right to purchase all of the CQH Common Shares not already owned by Cheniere or its affiliates in cash pursuant to mechanics set forth in the CQH LLC Agreement (the “Call Right”).

On May 21, 2018, Messrs. Deidiker, Gross and Kobiashvili held a meeting with representatives of Richards Layton to interview Jefferies to act as financial advisor to the CQH Conflicts Committee, when constituted, in connection with the Second Merger Proposal. After the interview, Messrs. Deidiker, Gross and Kobiashvili discussed the potential engagement of Jefferies as financial advisor to the CQH Conflicts Committee, the independence of Jefferies and reviewed the fee proposed by Jefferies. Messrs. Deidiker, Gross and Kobiashvili then determined that Jefferies was independent and had the requisite experience and qualifications to provide high-quality advice to the CQH Conflicts Committee, when constituted, in connection with its consideration of the Second Merger Proposal and determined to engage Jefferies as its financial advisor.

On May 24, 2018, the CQH Board formally constituted the CQH Conflicts Committee (consisting of Messrs. Deidiker, Gross and Kobiashvili) authorized the CQH Conflicts Committee to (i) explore, participate in discussions with, or otherwise assist or facilitate proposals to, Cheniere relating to the Second Merger Proposal, (ii) review and revise submissions of any proposal in respect of the Second Merger Proposal, (iii) review, evaluate and, as appropriate, negotiate the terms and conditions of the Second Merger Proposal, (iv) determine whether the Second Merger Proposal is fair and reasonable to, and in the best interests of, CQH and the Unaffiliated CQH Shareholders, (v) grant or withhold “Special Approval” (as defined in the CQH LLC Agreement) of the Second Merger Proposal, (vi) make a recommendation to the CQH Board with respect to the Second Merger Proposal and (vii) do all things that may, in the judgment of its members, be deemed necessary, appropriate or advisable to assist the CQH Conflicts Committee in carrying out its responsibilities with respect to the Second Merger Proposal.

On May 24, 2018, representatives of the CQH Conflicts Committee began to conduct legal, financial and other due diligence on Cheniere. The parties continued their due diligence through the signing of definitive transaction documentation on June 18, 2018.

On May 24, 2018, the CQH Conflicts Committee held a meeting with representatives of Jefferies and Richards Layton to receive feedback from a CQH Shareholder with respect to the Second Merger Proposal. In addition, throughout the process of considering the Second Merger Proposal, the CQH Conflicts Committee continued to receive and consider feedback provided by CQH Shareholders as applicable.

On June 1, 2018, the CQH Conflicts Committee met with members of senior management of Cheniere, with representatives of Jefferies and Richards Layton present, to receive a presentation with respect to the Second Merger Proposal. After the management presentation, the CQH Conflicts Committee met with representatives of Jefferies and Richards Layton and discussed preliminary reactions to the Second Merger Proposal. The CQH

 

32

Conflicts Committee received a presentation from Richards Layton regarding the duties and obligations of the CQH Conflicts Committee in connection with the Second Merger Proposal.

On June 1, 2018, the CQH Conflicts Committee executed an engagement letter with Jefferies.

On June 8, 2018, the CQH Conflicts Committee held a meeting with representatives of Jefferies and Richards Layton. Jefferies reviewed with the CQH Conflicts Committee the financial review undertaken by Jefferies to date, management’s financial projections for CQH, market information concerning Cheniere and Cheniere Partners, Jefferies’ preliminary financial analysis of the potential transaction with Cheniere, and the potential impact of the Call Right on the long-term outlook for CQH. The CQH Conflicts Committee discussed the preliminary financial analysis reviewed by Jefferies, the feedback received from CQH Shareholders, recent exchange transactions negotiated privately by former CQH Shareholders and Cheniere and potential counteroffers. Following discussion, the CQH Conflicts Committee concluded that it would make a counteroffer (the “Counteroffer”) to Cheniere in which Cheniere would acquire the CQH Common Shares not already owned by Cheniere in a stock-for-share exchange at the higher of (1) an exchange ratio of 0.4950 shares of Cheniere Common Stock for each CQH Common Share or (2) an 8% premium to the price of the CQH Common Shares at the announcement of an agreement.

On June 8, 2018, Sullivan & Cromwell delivered an initial draft of the Merger Agreement to Richards Layton. The initial draft of the Merger Agreement incorporated certain comments provided by Richards Layton as part of the negotiation of the First Merger Proposal.

On June 9, 2018, representatives of the CQH Conflicts Committee delivered the Counteroffer.

On June 12, 2018, representatives of Cheniere delivered a counteroffer (the “Responding Counteroffer”) in which Cheniere would acquire the CQH Common Shares not already owned by Cheniere in a stock-for-share exchange at an exchange ratio of 0.4600 shares of Cheniere Common Stock for each CQH Common Share and noted that, due to the timing, CQH Shareholders would receive a dividend with respect to the second quarter of 2018.

On June 12, 2018, the CQH Conflicts Committee held a meeting with representatives of Jefferies and Richards Layton to discuss the Responding Counteroffer. The CQH Conflicts Committee received a presentation from Jefferies with respect to the potential transaction with Cheniere, discussed the Responding Counteroffer, prices paid by Cheniere in recently disclosed voluntary exchanges with former CQH Shareholders, feedback from CQH Shareholders and the impact of the Call Right on the long-term outlook for CQH. Following discussion regarding the Responding Counteroffer, the CQH Conflicts Committee determined to propose a counteroffer (the “Second Counteroffer”) to Cheniere in which Cheniere would acquire the CQH Common Shares not already owned by Cheniere in a stock-for-share exchange at an exchange ratio of 0.4800 shares of Cheniere Common Stock for each CQH Common Share and, due to the timing, a dividend with respect to the second quarter of 2018.

On June 12, 2018, representatives of the CQH Conflicts Committee delivered the Second Counteroffer.

On June 13, 2018, representatives of Cheniere delivered another counteroffer (the “Second Responding Counteroffer”) in which Cheniere would acquire the CQH Common Shares not already owned by Cheniere in a stock-for-share exchange at an exchange ratio of 0.4750 shares of Cheniere Common Stock for each CQH Common Share and, due to the timing, a dividend with respect to the second quarter of 2018.

On June 13, 2018, the CQH Conflicts Committee held a meeting with representatives of Jefferies and Richards Layton to discuss the Second Responding Counteroffer. Jefferies reviewed with the CQH Conflicts Committee its preliminary financial analysis of the Second Responding Counteroffer and Richards Layton summarized the status of the draft Merger Agreement received from Sullivan & Cromwell. The CQH Conflicts Committee considered, among other things, (i) Jefferies’ preliminary financial analysis of the Second

 

33

Responding Counteroffer, (ii) prices paid by Cheniere in its recent voluntary exchanges with certain former CQH Shareholders, (iii) the potential impact of the Call Right and the long-term outlook for CQH and (iv) the open issues in the Merger Agreement being negotiated with Cheniere. Following discussion, the CQH Conflicts Committee determined to accept the Second Responding Counteroffer, subject to negotiation of satisfactory definitive documents, and authorized Richards Layton to negotiate the terms of the Merger Agreement with Sullivan & Cromwell.

On June 13, 2018, Richards Layton sent a revised draft of the Merger Agreement and discussed various terms of the Merger Agreement with Sullivan & Cromwell, including requiring that Cheniere covenant in the Merger Agreement to not exercise the Call Right with respect to CQH Common Shares prior to Closing and to pay a second-quarter dividend to CQH Shareholders in an amount at least equal to $0.57 per CQH Common Share.

On June 14, 2018, Richards Layton, Sullivan & Cromwell and certain members of management of Cheniere discussed various due diligence questions regarding Cheniere and the transaction. Sullivan & Cromwell also delivered a draft of the Support Agreement to Richards Layton.

On June 14, 2018, the CQH Conflicts Committee met with representatives of Jefferies and Richards Layton to discuss the status of the potential transaction with Cheniere. The CQH Conflicts Committee received a presentation from Richards Layton regarding the Merger Agreement and the Support Agreement (the “Key Transaction Documents”), including the material terms of the Merger Agreement and the Support Agreement, and the negotiation of certain open issues. Following discussion, the CQH Conflicts Committee authorized Richards Layton to continue to negotiate with Sullivan & Cromwell to finalize the Key Transaction Documents.

On June 14, 2018, Richards Layton, Sullivan & Cromwell and Sean Markowitz, General Counsel and Corporate Secretary of Cheniere, discussed the remaining open issues in the Key Transaction Documents. Among other things, the parties discussed the scope of representations and warranties for each of Cheniere and CQH and the interim operating covenants that would restrict Cheniere and CQH during the interim period between signing and closing. The parties also agreed that Cheniere would covenant in the Merger Agreement to pay a second quarter dividend to CQH Shareholders in an amount at least equal to $0.56 per CQH Common Share.

Between June 14, 2018 and June 18, 2018, Richards Layton and Sullivan & Cromwell finalized negotiation of the Key Transaction Documents.

On June 18, 2018, the CQH Conflicts Committee met, together with representatives of Jefferies and Richards Layton, to discuss the Merger. At this meeting, representatives of Richards Layton provided the CQH Conflicts Committee with a summary of each of the Key Transaction Documents and explained the resolution of certain open issues. Also at this meeting, representatives of Jefferies reviewed with the CQH Conflicts Committee its financial analysis of the Exchange Ratio, and Jefferies then rendered its opinion to the CQH Conflicts Committee to the effect that, as of that date and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Jefferies as set forth in its opinion, the Exchange Ratio set forth in the Merger Agreement was fair, from a financial point of view, to CQH and to the Unaffiliated CQH Shareholders. After full discussion, the CQH Conflicts Committee adopted resolutions pursuant to which the CQH Conflicts Committee (i) determined in good faith that the Merger Agreement and the transactions contemplated thereby, including the Merger, on the terms and conditions set forth in the Key Transaction Documents, are fair and reasonable to, and in the best interests of, CQH and the Unaffiliated CQH Shareholders, (ii) approved the Merger Agreement and the transactions contemplated thereby, including the Merger, upon the terms and conditions set forth in the Key Transaction Documents, (iii) recommended that the CQH Board approve the Merger and the transactions contemplated thereby upon the terms and conditions set forth in the Key Transaction Documents and (iv) desired and intended that its approval of the Merger, including the Key Transaction Documents and the transactions contemplated thereby on the terms

 

34

set forth in the Key Transaction Documents, constitute “Special Approval” (as defined in the CQH’s LLC Agreement, and pursuant to Section 7.8(a)(i) of the CQH LLC Agreement) of the Merger, including the Key Transaction Documents and the transactions contemplated thereby, on the terms set forth in the Key Transaction Documents.

On June 18, 2018, following the meeting of the CQH Conflicts Committee, the CQH Board, upon the recommendation of the CQH Conflicts Committee and due consideration and discussion, (i) determined that the Merger Agreement, the Key Transaction Documents, the Merger and the other transactions contemplated thereby are fair and reasonable to, and in the best interests of, CQH and the Unaffiliated CQH Shareholders and (ii) approved and declared advisable and in the best interest of CQH and the Unaffiliated CQH Shareholders, the Merger Agreement, the other Key Transaction Documents to which CQH is a party and the transactions contemplated thereby, including the Merger.

On the same date, the Cheniere Board, upon due consideration and discussion, (i) determined that the Merger Agreement, the Key Transaction Documents, the Merger and the other transactions contemplated thereby are in the best interests of, Cheniere and its stockholders and (ii) authorized and approved the Merger Agreement, the other Key Transaction Documents to which Cheniere is a party and the transactions contemplated thereby, including the Merger and certain other actions or transactions to be undertaken by Cheniere in connection with the Merger.

Thereafter, on June 18, 2018, the parties executed the definitive transaction documents.

On June 19, 2018, prior to market open, Cheniere and CQH issued a joint press release announcing the Merger.

Recommendation of the CQH Board

On June 18, 2018, the CQH Conflicts Committee, acting in good faith, unanimously determined that the Merger upon the terms set forth in the Merger Agreement is fair and reasonable to, and in the best interests of, CQH and the Unaffiliated CQH Shareholders, and approved the Merger Agreement and the transactions contemplated thereby, including the Merger. This action of the CQH Conflicts Committee constitutes “Special Approval” of the Merger Agreement and the transactions contemplated thereby, including the Merger, under the CQH LLC Agreement. The CQH Conflicts Committee recommended that the CQH Board approve the Merger upon the terms set forth in the Merger Agreement.

Based upon the recommendation of the CQH Conflicts Committee, the CQH Board unanimously approved the Merger Agreement and the transactions contemplated thereby and determined that the Merger Agreement and the transactions contemplated thereby are fair and reasonable to, and in the best interests of, CQH and the Unaffiliated CQH Shareholders. The CQH Board approved the Merger Agreement and the transactions contemplated thereby and directed that the Merger Agreement be submitted to the CQH Shareholders for their approval by written consent. The CQH Board recommends that the CQH Shareholders consent with respect to the Merger Agreement and the Merger.

Reasons for Approval by the CQH Conflicts Committee

The CQH Conflicts Committee consists of three directors that meet the qualifications for membership on a conflicts committee set forth in the CQH LLC Agreement: Jim D. Deidiker (Chairman), Jonathan S. Gross and Zurab S. Kobiashvili. The CQH Board authorized the CQH Conflicts Committee to (i) explore, participate in discussions with, or otherwise assist or facilitate proposals to, Cheniere relating to the Second Merger Proposal, (ii) review and revise submissions of any proposal in respect of the Second Merger Proposal, (iii) review, evaluate and, as appropriate, negotiate the terms and conditions of the Second Merger Proposal, (iv) determine whether the Second Merger Proposal is fair and reasonable to, and in the best interests of, CQH and the

 

35

Unaffiliated CQH Shareholders, (v) grant or withhold “Special Approval” (as defined in the CQH LLC Agreement) of the Second Merger Proposal, (vi) make a recommendation to the CQH Board with respect to the Second Merger Proposal and (vii) do all things that may, in the judgment of its members, be deemed necessary, appropriate or advisable to assist the CQH Conflicts Committee in carrying out its responsibilities with respect to the Second Merger Proposal.

The CQH Conflicts Committee retained Jefferies as its financial advisor and Richards Layton as its legal counsel. The CQH Conflicts Committee believed that Jefferies was independent based on a review of the relationships between Jefferies, on the one hand, and Cheniere and its affiliates, on the other. The CQH Conflicts Committee conducted a review and evaluation of the Merger and negotiations with Cheniere and its representatives with respect to the Merger Agreement and the Support Agreement.

The CQH Conflicts Committee, acting in good faith, unanimously determined that the Merger upon the terms set forth in the Merger Agreement is fair and reasonable to, and in the best interests of, CQH and the Unaffiliated CQH Shareholders, and has approved the Merger Agreement and the transactions contemplated thereby, including the Merger. This action of the CQH Conflicts Committee constitutes “Special Approval” of the Merger Agreement and the transactions contemplated thereby, including the Merger, under the CQH LLC Agreement. The CQH Conflicts Committee recommended that the CQH Board approve the Merger upon the terms set forth in the Merger Agreement.

Based upon the recommendation of the CQH Conflicts Committee, the CQH Board unanimously approved the Merger Agreement and the transactions contemplated thereby and determined that the Merger Agreement and the transactions contemplated thereby are fair and reasonable to, and in the best interests of, CQH and the Unaffiliated CQH Shareholders. The CQH Board approved the Merger Agreement and the transactions contemplated thereby and directed that the Merger Agreement be submitted to a vote of the CQH Shareholders. The CQH Board recommends that the CQH Shareholders consent with respect to the Merger Agreement and the Merger.

The CQH Conflicts Committee viewed the following factors as generally positive or favorable in arriving at its determination with respect to the Merger:

 

•

The Exchange Ratio of 0.4750 shares of Cheniere Common Stock for each Eligible Share represented an implied value of $30.56 per Eligible Share based upon the closing price of CQH Common Shares on June 15, 2018 (the last trading day before the approval of the Merger), and represented an implied premium of approximately 1.6% to the closing price of CQH Common Shares on June 15, 2018, an implied premium of approximately 9.3% to the closing price of CQH Common Shares on May 16, 2018 (the last trading day before the public announcement of a proposal in connection with the Merger), and a premium of approximately 4.2% to the value that Unaffiliated CQH Shareholders would receive if Cheniere exercised its Call Right on June 18, 2018.

 

•

The Unaffiliated CQH Shareholders will be entitled to receive the Second Quarter Distribution of at least $0.56 per CQH Common Share. The Merger will not close on or prior to the record date for the Second Quarter Distribution.

 

•

The value to be received by Unaffiliated CQH Shareholders as a result of (i) the exchange of each Eligible Share for 0.4750 shares of Cheniere Common Stock and (ii) the receipt of the Second Quarter Distribution, in the aggregate (the “Combined Value”), is expected to be slightly more than the value received by other prior CQH Shareholders that exchanged their CQH Common Shares for shares of Cheniere Common Stock in negotiated transactions with Cheniere that occurred during the first half of 2018. The Combined Value represents a premium of approximately 6.1% to the value that Unaffiliated CQH Shareholders would have received if Cheniere exercised the Call Right on June 18, 2018.

 

36

•

The Exchange Ratio is fixed and therefore the value of the consideration payable to the Unaffiliated CQH Shareholders will increase in the event that the market price of shares of Cheniere Common Stock increases prior to the closing of the Merger.

 

•

The terms and conditions of the Merger were determined through arm’s-length negotiations between Cheniere and the CQH Conflicts Committee and their respective representatives and advisors.

 

•

The Exchange Ratio represents an improvement over Cheniere’s initial proposal of 0.4500 shares of Cheniere Common Stock for each outstanding CQH Common Share, and the CQH Conflicts Committee believes that the Exchange Ratio represents the highest price per CQH Common Share that Cheniere was willing to pay at the time of the CQH Conflicts Committee’s approval.

 

•

The CQH Conflicts Committee believes that the growth prospects for an improved CQH Common Share price are limited as a result of the Call Right.

 

•

The CQH Conflicts Committee believes that the Merger presents the best opportunity to maximize value for Unaffiliated CQH Shareholders and is superior to CQH remaining as a standalone public entity, taking into account the potential for Cheniere to exercise the Call Right.

 

•

The financial presentation and opinion of Jefferies, dated June 18, 2018, to the CQH Conflicts Committee to the effect that, as of June 18, 2018 and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Jefferies as set forth in its opinion, the Exchange Ratio set forth in the Merger Agreement was fair, from a financial point of view, to CQH and the Unaffiliated CQH Shareholders. For a description of the opinion that the CQH Conflicts Committee received from Jefferies, please read the section titled “The Merger—Opinion of Jefferies, Financial Advisor to the Conflicts Committee,” beginning on page 39.

 

•

The Merger is expected generally to be non-taxable to Unaffiliated CQH Shareholders. For additional information on the tax consequences of the Merger, please read the section titled “Material U.S. Federal Income Tax Considerations” beginning on page 84.

 

•

The shares of Cheniere Common Stock that Unaffiliated CQH Shareholders will receive in the Merger have more liquidity than CQH Common Shares because of the larger average daily trading volume of shares of Cheniere Common Stock and because Cheniere has a broader investor base and larger public float.

 

•

The Merger provides Unaffiliated CQH Shareholders equity ownership in Cheniere, which will provide Unaffiliated CQH Shareholders with an opportunity to participate in the business of Cheniere.

 

•

The CQH Conflicts Committee retained financial and legal advisors with knowledge and experience with respect to public merger and acquisition transactions, master limited partnerships (“MLPs”), CQH’s industry generally, and CQH particularly, as well as substantial experience advising MLPs and other companies with respect to transactions similar to the Merger.

 

•

The Merger will allow Cheniere and CQH to achieve synergies in the form of cost savings and other efficiencies, including reduced SEC filing requirements and a reduction in the number of public company boards and other costs associated with multiple public companies.

 

•

The probability that Cheniere and CQH will be able to consummate the Merger is significantly increased by the Support Agreement requiring Cheniere to deliver the Cheniere Written Consent. The delivery of the Cheniere Written Consent by Cheniere with respect to the CQH Common Shares Cheniere owns will be sufficient to approve the Merger Agreement and the Merger.

 

•

The Merger is not subject to a vote of Cheniere Stockholders.

 

•

The other terms of the Merger Agreement, including:

 

•

the provisions preventing Cheniere from exercising the Call Right during the time period between when the Merger Agreement is signed and closing occurs; and

 

37

•

the provisions that provide the CQH Conflicts Committee an opportunity to review, evaluate and make a recommendation with respect to any proposed amendment to the Merger Agreement or waiver of the terms of the Merger Agreement.

The CQH Conflicts Committee considered the following factors to be generally negative or unfavorable in arriving at its determinations with respect to the Merger:

 

•

The Exchange Ratio is fixed and therefore the implied value of the consideration payable to Unaffiliated CQH Shareholders will decrease in the event that the market price of the shares of Cheniere Common Stock decreases prior to the closing of the Merger.

 

•

The Unaffiliated CQH Shareholders will receive shares of Cheniere Common Stock that currently do not pay any cash dividend.

 

•

Cheniere has greater leverage than CQH and therefore may be subject to greater financial risk.

 

•

Cheniere indicated to the CQH Conflicts Committee that Cheniere was interested only in acquiring the CQH Common Shares that it or its affiliates did not already own and that it was not interested in disposing of its interests in CQH. Because Cheniere indirectly controls and owns over 90% of the equity interests in CQH, it was unrealistic to expect an unsolicited third-party acquisition proposal to acquire assets or control of CQH.

 

•

Cheniere will submit the Cheniere Written Consent in favor of the Merger Agreement, which will be sufficient to approve the Merger Agreement and the Merger, even if the CQH Conflicts Committee no longer supports approval of the Merger Agreement.

 

•

Because the Merger is subject to the approval of holders of a majority of the outstanding CQH Common Shares and Cheniere owns more than 90% of the outstanding CQH Common Shares and has agreed to vote in favor of the Merger, the affirmative vote of the Unaffiliated CQH Shareholders is not needed to approve the Merger.

 

•

The Merger may not be completed in a timely manner, or at all, which could result in significant costs for CQH, and a failure to complete the Merger could negatively affect the trading price of CQH Common Shares.

 

•

There is risk that the potential benefits expected to be realized in the Merger might not be fully realized.

 

•

The Unaffiliated CQH Shareholders are not entitled to dissenters’ or appraisal rights under the Merger Agreement, the CQH LLC Agreement or Delaware law.

 

•

Litigation may be commenced in connection with the Merger and such litigation may increase costs and result in a diversion of management focus.

 

•

Certain members of CQH’s management or the CQH Board may have interests in the Merger that are different from, or in addition to, the interests of Unaffiliated CQH Shareholders.

After taking into account all of the factors set forth above, as well as others, the CQH Conflicts Committee concluded that the potential benefits of the Merger outweighed any negative or unfavorable considerations and determined that the Merger upon the terms set forth in the Merger Agreement is fair and reasonable to, and in the best interests of, CQH and the Unaffiliated CQH Shareholders.

The foregoing discussion is not intended to be exhaustive, but is intended to address the material information and principal factors considered by the CQH Conflicts Committee in considering the Merger. In view of the number and variety of factors and the amount of information considered, the CQH Conflicts Committee did not find it practicable to, and did not make specific assessments of, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. In addition, the CQH Conflicts Committee did not undertake to make any specific determination as to whether any particular factor, or any

 

38

aspect of any particular factor, was favorable or unfavorable to its ultimate determination, and individual members of the CQH Conflicts Committee may have given different weights to different factors. The CQH Conflicts Committee made its determination based on the totality of information presented to, and the investigation conducted by, the CQH Conflicts Committee. It should be noted that certain statements and other information presented in this section are forward-looking in nature and, therefore, should be read in light of the factors discussed under the section titled “Special Note Regarding Forward-Looking Statements” beginning on page 25.

Opinion of Jefferies, Financial Advisor to the CQH Conflicts Committee

In June 2018, the CQH Conflicts Committee retained Jefferies to act as its financial advisor in connection with a possible sale, disposition or other business transaction or series of transactions involving all or a material portion of the equity in, or assets of, CQH. In connection with this engagement, the CQH Conflicts Committee requested that Jefferies evaluate the fairness to CQH and to the Unaffiliated CQH Shareholders, from a financial point of view, of the Exchange Ratio set forth in the Merger Agreement. At the meeting of the CQH Conflicts Committee on June 18, 2018, Jefferies rendered its opinion to the CQH Conflicts Committee to the effect that, as of that date and based upon and subject to the various assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Jefferies as set forth in its opinion, the Exchange Ratio set forth in the Merger Agreement was fair, from a financial point of view, to CQH and to the Unaffiliated CQH Shareholders.

The full text of the written opinion of Jefferies, dated as of June 18, 2018, is attached hereto as Annex B. Jefferies’ opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Jefferies in rendering its opinion. Jefferies’ opinion was directed to the CQH Conflicts Committee and addresses only the fairness, from a financial point of view, of the Exchange Ratio set forth in the Merger Agreement as of the date of the opinion to CQH and to the Unaffiliated CQH Shareholders. It does not address any other aspects of the Merger and does not constitute a recommendation as to how or whether any CQH Shareholder should consent, vote or act with respect to the Merger or any matter related thereto. The summary of the opinion of Jefferies set forth below is qualified in its entirety by reference to the full text of the opinion.

In arriving at its opinion, Jefferies, among other things:

 

•

reviewed a draft dated June 17, 2018 of the Merger Agreement;

 

•

reviewed certain publicly available financial and other information about CQH and Cheniere;

 

•

reviewed certain information furnished to Jefferies by the management of Cheniere, including financial forecasts and analyses, relating to the business, operations and prospects of each of CQH and Cheniere;

 

•

held discussions with members of senior management of Cheniere concerning the matters described in the second and third bullet points above;

 

•

reviewed the share trading price history and valuation multiples for the CQH Common Shares and the Cheniere Common Stock and compared them with those of certain publicly traded companies and partnerships that Jefferies deemed relevant;

 

•

compared the proposed financial terms of the Merger with the financial terms of certain other transactions that Jefferies deemed relevant;

 

•

considered certain terms of the CQH LLC Agreement, including Cheniere’s limited call right under Article XIII thereof to acquire the CQH Common Shares not owned by Cheniere on the terms and conditions set forth therein; and

 

•

conducted such other financial studies, analyses and investigations as Jefferies deemed appropriate.

 

39

In Jefferies’ review and analysis and in rendering its opinion, Jefferies assumed and relied upon, but did not assume any responsibility to independently investigate or verify, the accuracy and completeness of all financial and other information that was supplied or otherwise made available by Cheniere or that was publicly available to Jefferies (including, without limitation, the information described above), or that was otherwise reviewed by Jefferies. Jefferies relied on assurances of the management of Cheniere that it was not aware of any facts or circumstances that would make such information inaccurate or misleading. In its review, Jefferies did not obtain any independent evaluation or appraisal of any of the assets or liabilities of, nor did Jefferies conduct a physical inspection of any of the properties or facilities of, CQH or Cheniere, nor was Jefferies furnished with any such evaluations or appraisals of such physical inspections, nor did Jefferies assume any responsibility to obtain any such evaluations or appraisals.

With respect to the financial forecasts provided to and examined by Jefferies, Jefferies noted that projecting future results of any company is inherently subject to uncertainty. Cheniere informed Jefferies, however, and Jefferies assumed, that such financial forecasts were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Cheniere as to the future financial performance of each of CQH and Cheniere. Jefferies expressed no opinion as to such financial forecasts or the assumptions on which they were made.

Jefferies’ opinion was based on economic, monetary, regulatory, market and other conditions existing and which could be evaluated as of the date of its opinion. Jefferies expressly disclaimed any undertaking or obligation to advise any person of any change in any fact or matter affecting Jefferies’ opinion of which Jefferies became aware after the date of its opinion.

Jefferies made no independent investigation of any legal or accounting matters affecting CQH or Cheniere, and Jefferies assumed the correctness in all respects material to Jefferies’ analysis of all legal, regulatory, accounting and tax advice given to the CQH Conflicts Committee, including, without limitation, advice as to the legal, accounting and tax consequences of the terms of, and transactions contemplated by, the Merger Agreement to CQH and the CQH Shareholders. In addition, in preparing its opinion, Jefferies did not take into account any tax consequences of the transaction to any CQH Shareholder. Cheniere advised Jefferies that the Merger would qualify as a tax-free reorganization for federal income tax purposes. Jefferies also assumed that the Merger would be consummated in accordance with the terms of the Merger Agreement without waiver, modification or amendment of any term, condition or agreement in any respect material to Jefferies’ analyses or opinion and in compliance with applicable laws, documents and other requirements and that the final form of the Merger Agreement would be substantially similar to the last draft reviewed by Jefferies in all respects material to its analysis and opinion. Jefferies also assumed that in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the Merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on CQH, Cheniere, or the contemplated benefits of the Merger.

Jefferies was not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of CQH or any other alternative transaction.

Jefferies’ opinion was for the use and benefit of the CQH Conflicts Committee in its consideration of the Merger, and Jefferies’ opinion did not address the relative merits of the transactions contemplated by the Merger Agreement as compared to any alternative transaction or opportunity that might be available to CQH, nor did it address the underlying business decision by CQH to engage in the Merger or the terms of the Merger Agreement or the documents referred to therein. Jefferies’ opinion did not constitute a recommendation as to how or whether any CQH Shareholder should consent, vote or act with respect to the Merger or any matter related thereto. In addition, Jefferies was not asked to address, and its opinion did not address, the fairness to, or any other consideration of, the holders of any class of securities, creditors or other constituencies of CQH, other than the Unaffiliated CQH Shareholders. Jefferies expressed no opinion as to what the value of the Cheniere Common Stock would be when issued pursuant to the Merger or the prices at which the CQH Common Shares or the

 

40

Cheniere Common Stock would trade at any time. Furthermore, Jefferies did not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any officers, directors or employees of any parties to the Merger, or any class of such persons, in connection with the Merger, whether relative to the Exchange Ratio or otherwise. Jefferies’ opinion was authorized by the Fairness Committee of Jefferies.

In connection with rendering its opinion, Jefferies performed a variety of financial and comparative analyses, which are summarized below. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant quantitative and qualitative methods of financial analysis and the applications of those methods to the particular circumstances and, therefore, is not necessarily susceptible to partial analysis or summary description. Jefferies believes that its analyses must be considered as a whole. Considering any portion of Jefferies’ analyses or the factors considered by Jefferies, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying the conclusion expressed in Jefferies’ opinion. In addition, Jefferies may have given various analyses more or less weight than other analyses and may have deemed various assumptions more or less probable than other assumptions, so that the range of valuations resulting from any particular analysis described below should not be taken to be Jefferies’ view of CQH’s or Cheniere’s actual value. Accordingly, the conclusions reached by Jefferies are based on all analyses and factors taken as a whole and also on the application of Jefferies’ own experience and judgment.

In performing its analyses, Jefferies made numerous assumptions with respect to industry performance, general business, economic, monetary, regulatory, market and other conditions and other matters, many of which are beyond the parties’ and Jefferies’ control. The analyses performed by Jefferies are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the per share value of the CQH Common Shares or the Cheniere Common Stock do not purport to be appraisals or to reflect the prices at which the CQH Common Shares or the Cheniere Common Stock, as applicable, may actually be sold or acquired. The analyses performed were prepared solely as part of Jefferies’ analysis of the fairness, from a financial point of view, of the Exchange Ratio to CQH and to the Unaffiliated CQH Shareholders, and were provided to the CQH Conflicts Committee in connection with the delivery of Jefferies’ opinion.

The following is a summary of the material financial and comparative analyses performed by Jefferies in connection with Jefferies’ delivery of its opinion and that were presented to the CQH Conflicts Committee at the meeting on June 18, 2018. The financial analyses summarized below include information presented in tabular format. In order to fully understand Jefferies’ financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Jefferies’ financial analyses. The following summary does not purport to be a complete description of the financial analyses performed by Jefferies and factors considered in connection with Jefferies’ opinion.

Unaudited Financial Projections Provided to Jefferies

Jefferies was provided by Cheniere management with unaudited financial projections regarding Cheniere, CQH and their respective businesses (including for Cheniere EBITDA, Cheniere Non-Consolidated Cash Flow, CQH Distributions Received from Cheniere Partners and CQH Unlevered Free Cash Flows, each of which is summarized under the section titled “Unaudited Financial Projections of Cheniere and CQH” beginning on page 45). At the direction of the CQH Conflicts Committee, Jefferies used such unaudited financial projections in performing certain valuation analyses, as applicable, to imply valuations for each of Cheniere and CQH.

For purposes of the financial analyses described in this section:

 

•

“EBITDA” means earnings before interest, taxes, depreciation and amortization, and in the case of CQH was calculated as CQH Distributions Received from Cheniere Partners less projected general and administrative expenses provided by Cheniere management;

 

41

•

For Cheniere, Unlevered Free Cash Flows were calculated as Cheniere Non-Consolidated Cash Flow plus projected interest expense provided by Cheniere management; and

 

•

Enterprise values were calculated as fully-diluted equity values based on closing share or unit prices on June 15, 2018, the last full trading day prior to the date that Jefferies delivered its opinion to CQH Conflicts Committee, plus total debt, preferred shares and non-controlling interests (as applicable) and less cash and cash equivalents.

In calculating implied Exchange Ratio ranges as reflected in certain of the analyses described below, Jefferies:

 

•

divided the low-end of the approximate implied per share equity value ranges derived for CQH from such analyses by the high-end of the approximate implied per share equity value ranges derived for Cheniere from such analyses in order to calculate the low-end of the implied Exchange Ratio ranges; and

 

•

divided the high-end of the approximate implied per share equity value ranges derived for CQH from such analyses by the low-end of the approximate implied per share equity value ranges derived for Cheniere from such analyses in order to calculate the high-end of the implied Exchange Ratio ranges.

Selected Public Companies Analysis

Jefferies performed selected public companies analyses of each of Cheniere and CQH in which Jefferies reviewed publicly available financial, stock market and operating information of Cheniere, CQH and the selected publicly traded companies and partnerships listed below.

In performing a selected public companies analysis of Cheniere, Jefferies reviewed publicly available financial, stock market information and operating information of the following four energy infrastructure tax-paying corporations with liquefied natural gas assets (the “Selected Energy Infrastructure Companies”) and market capitalizations greater than $2.5 billion that Jefferies in its professional judgment considered generally relevant to Cheniere for purposes of its financial analyses:

 

•

AltaGas Ltd.

 

•

Dominion Energy, Inc.

 

•

Kinder Morgan, Inc., and

 

•

Sempra Energy

In performing a selected public companies analysis of CQH, Jefferies reviewed publicly available financial, stock market information and operating information of the following seven partnerships (the “Selected Energy Partnerships,” and together with the Selected Energy Infrastructure Companies, the “Selected Companies”) with market capitalizations between approximately $1.0 billion and $10 billion and having the primary source of EBITDA derived from long-term contracted cash flows from an affiliated sponsor, that Jefferies in its professional judgment considered generally relevant to CQH for purposes of its financial analyses:

 

•

Andeavor Logistics LP

 

•

Dominion Energy Midstream Partners, LP

 

•

Holly Energy Partners, L.P.

 

•

Phillips 66 Partners LP

 

•

Shell Midstream Partners, L.P.

 

•

Valero Energy Partners LP, and

 

•

Westlake Chemical Partners LP

 

42

For each of the Selected Companies, Jefferies reviewed, among other information, enterprise values as a multiple, to the extent publicly available, of estimated EBITDA for calendar years 2018 and 2019. Jefferies also reviewed equity values based on closing share prices on June 15, 2018. Estimated financial data of the Selected Companies were based on publicly available research analysts’ estimates and other publicly available information. Estimated financial data of each of Cheniere and CQH were based on Cheniere’s unaudited forecasted financial information and publicly available research analysts’ estimates.

In its analysis, Jefferies derived and compared multiples for Cheniere, CQH and the Selected Companies, calculated as follows:

 

•

the total enterprise value divided by estimated EBITDA for calendar year 2018 (referred to below as “TEV/2018E EBITDA”), and

 

•

the total enterprise value divided by estimated EBITDA for calendar year 2019 (referred to below as “TEV/2019E EBITDA”).

This analysis indicated the following:

Selected Companies Multiples

 

Low

High

Mean

Median

Selected Energy Infrastructure Companies

TEV/2018E EBITDA

9.3x

14.9x

11.7x

11.3x

TEV/2019E EBITDA

6.5x

13.2x

10.2x

10.6x

Selected Energy Partnerships

TEV/2018E EBITDA

10.3x

24.1x

13.9x

12.7x

TEV/2019E EBITDA

9.1x

18.5x

11.6x

10.3x

Using the reference ranges for the benchmarks set forth below, which ranges were selected by Jefferies in its professional judgement, Jefferies determined implied per share equity value ranges for Cheniere and CQH as follows:

 

Cheniere Benchmark		Multiple Range				Cheniere Implied Per Share Equity Value Range
Selected Energy Infrastructure Companies
TEV/2018E EBITDA			16.0x – 18.0x			$	46.99 – $67.34
TEV/2019E EBITDA			15.0x – 17.0x			$	44.31 – $65.66
CQH Benchmark		Multiple Range				CQH Implied Per Share Equity Value Range
Selected Energy Partnerships
TEV/2018E EBITDA			11.5x – 13.5x			$	26.63 – $31.26
TEV/2019E EBITDA			10.0x – 12.0x			$	24.50 – $29.40

 

43

Utilizing the implied per share equity value ranges derived for Cheniere and CQH described above, Jefferies calculated the following implied Exchange Ratio ranges, as compared to the Exchange Ratio set forth in the Merger Agreement of 0.4750:

Implied Exchange Ratio Ranges

 

Total Enterprise Value / EBITDA		Implied Exchange Ratio Range
TEV/2018E EBITDA			0.3954x – 0.6653x
TEV/2019E EBITDA			0.3732x – 0.6636x

No company or partnership utilized in the selected public company analysis is identical to CQH or Cheniere. In evaluating the Selected Companies, Jefferies made numerous judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond CQH’s, Cheniere’s and Jefferies’ control. Mathematical analysis, such as determining the median, is not in itself a meaningful method of using comparable company data.

Discounted Cash Flow Analysis

Jefferies performed separate discounted cash flow analyses of Cheniere and CQH by calculating the estimated present value of the Unlevered Free Cash Flows that each of Cheniere and CQH was forecasted to generate during the second half of 2018 through the calendar year ending December 31, 2023. Terminal values of Cheniere and CQH were calculated by applying to Cheniere’s and CQH’s respective estimated EBITDA for the calendar year ending December 31, 2023 a selected range of EBITDA multiples of 11.0x to 13.0x, in the case of Cheniere, and 10.0x to 12.0x, in the case of CQH. The present values (as of June 30, 2018) of the cash flows and terminal values were then calculated using a discount date range of 6.36% to 7.36%, in the case of Cheniere, and 9.96% to 10.96%, in the case of CQH. These analyses indicated approximate implied per share equity value ranges for Cheniere and CQH of $53.58 to $70.96 and $28.70 to $33.24, respectively.

Utilizing the implied per share value ranges derived for Cheniere and CQH described above, Jefferies calculated the following implied Exchange Ratio ranges, as compared to the Exchange Ratio set forth in the Merger Agreement of 0.4750:

 

Implied Exchange Ratio Range

0.4044x – 0.6203x

Selected Affiliate Mergers

For informational purposes only, using publicly available information, Jefferies analyzed the premiums offered in 22 selected mergers involving affiliate master limited partnerships announced since June 2009. For each of the selected transactions, Jefferies calculated the premium represented by the offer price over the target company’s closing unit price one trading day, seven trading days and 30 trading days prior to the transaction’s announcement. The analysis indicated the following premiums for those time periods prior to announcement:

Premiums Paid Percentages

 

Time Period Prior to Announcement		75th Percentile				Mean				Median				25th Percentile
1 Trading Day			18.0	%			11.8	%			9.5	%			6.3	%
7 Trading Days			18.0	%			12.4	%			11.6	%			5.7	%
30 Trading Days			17.1	%			12.6	%			10.4	%			7.2	%

 

44

Using a range of the 25th percentile and the 75th percentile for each of the time periods described above, Jefferies performed a premiums paid analysis using the closing prices of the CQH Common Shares one trading day, seven trading days and 30 trading days prior to June 15, 2018. This analysis indicated a range of implied share prices for CQH of $31.08 to $35.49. Based on LNG’s closing share price on June 15, 2018 of $64.34, this analysis further indicated an implied Exchange Ratio of 0.4831x to 0.5516x, compared to the Exchange Ratio set forth in the Merger Agreement of 0.4750.

Historical Exchange Ratio

For informational purposes only, Jefferies observed the historical Exchange Ratios for the one month, three months, six months and last 12 months prior to June 15, 2018, of the CQH Common Shares to the Cheniere Common Stock, which indicated a range of Exchange Ratios of 0.4454x (on May 16, 2018) to 0.6227x (on August 10, 2017), compared to the Exchange Ratio set forth in the Merger Agreement of 0.4750.

General

Jefferies’ opinion was one of many factors taken into consideration by the CQH Conflicts Committee in making its determination to approve the proposed Merger and should not be considered determinative of the views of the CQH Conflicts Committee with respect to the proposed Merger or the Exchange Ratio.

Jefferies was selected by the CQH Conflicts Committee based on Jefferies’ qualifications, expertise and reputation. Jefferies is an internationally recognized investment banking and advisory firm. Jefferies, as part of its investment banking business, is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements, financial restructurings and other financial services.

CQH has agreed to pay Jefferies a fee of $2.0 million, $250,000 of which was payable upon the execution of Jefferies’ engagement letter and $1.75 million of which was payable upon delivery of Jefferies’ opinion. CQH has also agreed to reimburse Jefferies for certain expenses incurred. CQH has also agreed to indemnify Jefferies against certain liabilities arising out of or in connection with the services rendered and to be rendered by it under its engagement. In the past two years, prior to the date of its opinion, Jefferies (i) provided financial advisory services to the CQH Conflicts Committee and received fees in an amount of $250,000 for the rendering of such services and (ii) did not provide financial advisory or financing services to, or receive fees from, Cheniere or any of its affiliates (other than the CQH Conflicts Committee). Jefferies maintains a market in the securities of CQH or Cheniere, and in the ordinary course of business, Jefferies and its affiliates may trade or hold securities of CQH or Cheniere and/or their respective affiliates for its own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions in those securities. In addition, in the future Jefferies may seek to provide financial advisory and/or financing services to the CQH Conflicts Committee, CQH, Cheniere or entities that are affiliated with CQH or Cheniere, for which Jefferies would expect to receive compensation. Except as otherwise expressly provided in its engagement letter with the CQH Conflicts Committee, Jefferies’ opinion may not be used or referred to by CQH or Cheniere, or quoted or disclosed to any person in any manner, without Jefferies’ prior written consent.

Unaudited Financial Projections of Cheniere and CQH

In connection with the proposed Merger, management of CQH provided projections relating to CQH and management of Cheniere provided projections relating to Cheniere that included future financial and operating performance. These non-public projections were provided to Jefferies for use and consideration in its financial analysis and in preparation of its opinion to the CQH Conflicts Committee. A summary of these projections, rounded to the nearest hundred million, is included below to give Unaffiliated CQH Shareholders access to certain non-public unaudited prospective financial information that was made available to Jefferies, the CQH Conflicts Committee and the CQH Board in connection with the proposed merger.

 

45

You should be aware that uncertainties are inherent in prospective financial information of any kind. None of Cheniere, CQH or any of their respective affiliates, advisors, officers, directors or representatives has made or makes any representation or can give any assurance to any CQH Shareholder or any other person regarding the ultimate performance of CQH or Cheniere compared to the summarized information set forth below or that any such results will be achieved.

The summary projections set forth below summarize the most recent projections made available to the legal and financial advisors to CQH, the CQH Board and the CQH Conflicts Committee prior to the execution of the merger agreement, rounded to the nearest hundred million. The inclusion of the following summary projections in this consent solicitation/prospectus should not be regarded as an indication that Cheniere, CQH, or their respective representatives considered or consider the projections to be a reliable or accurate prediction of future performance or events, and the summary projections set forth below should not be relied upon as such.

The CQH and Cheniere projections were prepared in connection with the evaluation of the proposed Merger or for internal planning purposes only and not with a view toward public disclosure or toward compliance with GAAP, the published guidelines of the SEC, or the guidelines established by the American Institute of Certified Public Accountants. Neither KPMG LLP (“KPMG”) nor any other independent registered public accounting firm has compiled, examined or performed any procedures with respect to the prospective financial information contained in the projections and accordingly, KPMG does not express an opinion or any other form of assurance with respect thereto. The KPMG reports incorporated by reference into this consent solicitation/prospectus with respect to Cheniere relate to historical financial information of Cheniere, and the KPMG reports incorporated by reference into this consent solicitation/prospectus with respect to CQH relate to historical financial information of CQH. Such reports do not extend to the projections included below and should not be read to do so. None of the Cheniere Board, CQH Board nor the CQH Conflicts Committee prepared the summarized information and none of the Cheniere Board, the CQH Board, the CQH Conflicts Committee, Cheniere or CQH gives any assurance regarding the summarized information. The internal financial projections of CQH and Cheniere are inherently subjective in nature, susceptible to interpretation and, accordingly, such forecasts may not be achieved.

The internal financial forecasts also reflect numerous assumptions made by management of Cheniere and CQH, including material assumptions that may not be realized and are subject to significant uncertainties and contingencies, all of which are difficult to predict and many of which are beyond the control of the preparing party. Accordingly, there can be no assurance that the assumptions made in preparing the internal financial forecasts upon which the foregoing projected financial information was based will prove accurate. There will be differences between actual and forecasted results, and the differences may be material. The risk that these uncertainties and contingencies could cause the assumptions to fail to be reflective of actual results is further increased due to the length of time in the future over which these assumptions apply. Any inaccuracy of assumptions and projections in early periods could have a compounding effect on the projections shown for the later periods. Thus, any failure of an assumption or projection to be reflective of actual results in an early period could have a greater effect on the projected results failing to be reflective of actual events in later periods. The projections are forward-looking statements and are subject to risks and uncertainties. Please read the section titled “Special Note Regarding Forward-Looking Statements” beginning on page 25.

 

(in billions, rounded to the nearest hundred million)		2018				2019				2020				2021				2022				2023
Cheniere EBITDA (1)		$	2.5			$	2.6			$	4.1			$	4.0			$	4.5			$	4.5
Cheniere Non-Consolidated Cash Flow (2)		$	0.0			$	(0.4	)		$	0.9			$	2.0			$	2.2			$	2.2
CQH Distributions Received from Cheniere Partners		$	0.5			$	0.6			$	0.8			$	0.8			$	0.8			$	0.8
CQH Unlevered Free Cash Flow (3)		$	0.5			$	0.6			$	0.8			$	0.8			$	0.7			$	0.7

The above measures are not measures of financial performance under GAAP, and should not be considered as alternatives to net income (loss), operating income, or other performance measures derived in accordance with GAAP. Cheniere’s computations of these measures may differ from similarly titled measures used by others.

 

46

(1)	EBITDA is defined as earnings before interest, taxes, depreciation and amortization.

(2)

Cheniere Non-Consolidated Cash Flow is defined as the sum of distributions received by Cheniere from Cheniere Partners and CQH, EBITDA from Cheniere Marketing, LLC, management fees received by Cheniere, and equity distributable cash flow from Corpus Christi Liquefaction, LLC, less general and administrative expenses, interest expense, capital expenditures and Corpus Christi Liquefaction, LLC equity funding.

(3)	CQH Unlevered Free Cash Flow is defined as distributions received from Cheniere Partners, less CQH general and administrative expense, and less payments to Cheniere under a tax-sharing agreement.

Reasons of the Cheniere Board for the Merger

In evaluating the Merger, the Cheniere Board consulted with management of Cheniere and Cheniere’s legal and financial advisors and in reaching its decision to approve the Merger, the Cheniere Board considered many factors, including the following material factors:

 

•

the Merger will simplify Cheniere’s organizational structure as a result of Cheniere owning 100% of CQH, which will streamline Cheniere’s corporate structure, reduce complexity and enhance transparency for debt and equity investors; and

 

•

the Merger will maintain Cheniere’s financial flexibility as a result of doing a stock-for-share exchange versus a cash transaction.

Regulatory Matters

In connection with the Merger, Cheniere intends to make all required filings under the Securities Act and the Exchange Act, as well as any required filings or applications with the NYSE American. Cheniere and CQH are unaware of any other requirement for the filing of information with, or the obtaining of the approval of, governmental authorities in any jurisdiction that is applicable to the Merger.

The Merger is not reportable under the HSR Act, and therefore no filings with respect to the Merger were required with the FTC or the DOJ.

Interests of Directors and Executive Officers of CQH in the Merger

In considering the recommendation of the CQH Board with respect to the Merger proposal, CQH Shareholders should be aware that certain of the directors and executive officers of Cheniere and CQH have interests in the transaction that may differ from, or are in addition to, the interests of CQH Shareholders generally. These interests may present such directors and executive officers with actual or potential conflicts of interests, and these interests, to the extent they may be substantial, are described below. The members of the CQH Conflicts Committee and the CQH Board were aware of and considered these interests and relationships, among other matters, when they approved the Merger Agreement and when the CQH Board recommended that CQH Shareholders approve the Merger.

Common Directors and Executive Officers

CQH does not have any employees and relies on Cheniere to manage the conduct of CQH’s business through the Services Agreement. Each executive officer of CQH (each of whom also serves as a director of CQH) is also an executive officer of Cheniere. Additionally, Jack A. Fusco, who serves as President and Chief Executive Officer of CQH and Chairman of the CQH Board, also serves as a director on the Cheniere Board. CQH has not paid any cash or equity-based compensation to its executive officers since its inception. Cheniere compensates these officers for the performance of their duties to Cheniere, including in respect of the management of CQH. Persons who are directors or officers of both Cheniere and CQH owe duties both to

 

47

Cheniere Stockholders and to CQH Shareholders, and may have interests in the Merger that are different from the interests of CQH Shareholders generally.

The following chart sets forth certain information, as of the date of this consent solicitation/prospectus, regarding the directors and executive officers of CQH and their respective positions, if any, at Cheniere.

 

Executive Officer/Director		Cheniere		CQH
Jack A. Fusco		President and Chief Executive Officer, Director		President and Chief Executive Officer, Chairman of Board of Directors
Anatol Feygin		Executive Vice President and Chief Commercial Officer		Executive Vice President and Chief Commercial Officer, Director
Doug Shanda		Senior Vice President, Operations		Senior Vice President, Operations, Director
Michael J. Wortley		Executive Vice President and Chief Financial Officer		Executive Vice President, Chief Financial Officer, Director
Jim D. Deidiker		None		Director
Jonathan S. Gross		None		Director
Zurab S. Kobiashvili		None		Director

The four executive officers of CQH are expected to continue to serve as executive officers of Cheniere following the Merger.

Equity Interests of CQH’s Directors and Executive Officers in CQH and Cheniere

One director of CQH beneficially owns CQH Common Shares and will receive the Merger Consideration upon completion of the Merger in accordance with the Merger Agreement. Please read the section titled “Security Ownership of Certain Beneficial Owners and Management/Directors of CQH” beginning on page 64 for further detail.

All of the executive officers and one non-management director of CQH beneficially own equity securities of Cheniere. The individuals that own shares of Cheniere Common stock, and all of these individuals in the aggregate, hold shares of Cheniere Common Stock representing less than 1% of the shares of Cheniere Common Stock outstanding as of August 15, 2018.

Executive Compensation

CQH does not directly employ any of the individuals responsible for managing or operating its business. None of the individuals who has served as a director or executive officer of CQH or Cheniere since the beginning of 2017 has any agreements or understandings with Cheniere, CQH or any other party with respect to any type of compensation (whether present, deferred or contingent) that is based on or otherwise relates to the Merger and is reportable under Item 402(t) of Regulation S-K under the Securities Act, and thus no advisory vote pursuant to Rule 14a-21(c) of the Exchange Act is required to be included in the CQH written consent in connection with this consent solicitation/prospectus.

Indemnification

All of the directors and executive officers of CQH have the right to indemnification under the organizational documents of CQH, the CQH LLC Agreement and the Merger Agreement. In addition, all of the directors of

 

48

Cheniere and all of the officers of Cheniere have the right to indemnification under the organizational documents of Cheniere and indemnification agreements with Cheniere.

Indemnification and Insurance

The parties to the Merger Agreement have agreed that, from and after the Effective Time, Cheniere and the Surviving Entity will indemnify and hold harmless (subject to certain conditions to provide advancement of expenses and applicable law), each present and former director and officer of CQH (each, an “Indemnified Person”), from and against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or related to matters pertaining to such Indemnified Person’s service as a director, officer or employee of CQH or services performed by such Indemnified Person at the request of CQH (including acting, at the request of CQH, as a director, officer, employee, partner, manager, fiduciary or trustee of any other person) at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time of the Merger, including in connection with the transactions contemplated by the Merger Agreement and any actions to enforce the indemnification provisions in the Merger Agreement or any other indemnification or the advancement right of any Indemnified Person.

In addition, the Merger Agreement contains certain obligations related to the purchase of directors’ and officers’ liability insurance “tail” policies with respect to matters existing or occurring at or prior to the Effective Time of the Merger for persons who are covered under CQH’s existing policies. For additional information please read the section titled “The Merger Agreement—Indemnification; Directors’ and Officers’ Insurance” beginning on page 58.

Listing of Cheniere Common Stock; Delisting and Deregistration of CQH Common Shares

Cheniere expects to obtain approval to list the shares of Cheniere Common Stock to be issued pursuant to the Merger Agreement on the NYSE American, which approval is a condition to the closing of the Merger. Assuming that such approval is sought and obtained, Cheniere expects the shares of Cheniere Common Stock to be issued pursuant to the Merger Agreement to be quoted on the NYSE American under the symbol “LNG.”

No Dissenters’ or Appraisal Rights

CQH Shareholders do not have dissenters’ or appraisal rights under applicable law or contractual appraisal rights under the CQH LLC Agreement or the Merger Agreement.

No Cheniere Stockholder Approval Required

The approval of the Merger Agreement and the Merger by Cheniere does not require the affirmative vote or consent of Cheniere Stockholders.

Accounting Treatment of the Merger

The Merger will be accounted for in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 810, Consolidation. Because Cheniere controls CQH both before and after the Merger, the changes in Cheniere’s ownership interest in CQH resulting from the Merger will be accounted for as an equity transaction, and no gain or loss will be recognized in Cheniere’s consolidated statement of income.

 

49

THE MERGER AGREEMENT

This section describes the material terms of the Merger Agreement, which was executed on June 18, 2018. The description of the Merger Agreement in this section and elsewhere in this consent solicitation/prospectus is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which is attached as Annex A to this consent solicitation/prospectus and is incorporated by reference herein in its entirety. This summary does not purport to be complete and may not contain all of the information about the Merger Agreement that is important to you. You are encouraged to read the Merger Agreement carefully and in its entirety, because it is the legal document that governs the Merger.

Explanatory Note Regarding the Merger Agreement

The Merger Agreement and this summary are included solely to provide you with information regarding the terms of the Merger Agreement. Factual disclosures about Cheniere, CQH, or any of their respective subsidiaries or affiliates contained in this consent solicitation/prospectus or in Cheniere’s or CQH’s public reports filed with the SEC may supplement, update or modify the factual disclosures about Cheniere or CQH, as applicable, contained in the Merger Agreement. The representations, warranties and covenants made in the Merger Agreement by Cheniere, CQH and Merger Sub were made solely for the purposes of the Merger Agreement and as of specific dates and were qualified and subject to important limitations agreed to by Cheniere, CQH and Merger Sub in connection with negotiating the terms of the Merger Agreement. In particular, in your review of the representations and warranties contained in the Merger Agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the Merger Agreement may have the right not to complete the Merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the Merger Agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to shareholders and reports and documents filed with the SEC, and in some cases were qualified by the matters contained in the disclosure letter that CQH delivered to Cheniere in connection with the Merger Agreement, which disclosures were not reflected in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this consent solicitation/prospectus, may have changed since the date of the Merger Agreement. You should not rely on the Merger Agreement representations, warranties, covenants or any descriptions thereof as characterizations of the actual state of facts of Cheniere, CQH or Merger Sub or any of their respective subsidiaries or affiliates.

The Merger

The Merger Agreement provides that, upon the terms and conditions in the Merger Agreement, and in accordance with the CQH LLC Agreement and the DLLCA, at the Effective Time of the Merger, CQH will merge with and into Merger Sub, with Merger Sub being the Surviving Entity.

Closing and Effective Time of the Merger

Unless otherwise mutually agreed in writing between Cheniere and CQH, the Closing Date will take place on the first business day following the day on which the last to be satisfied or waived of the conditions to the completion of the Merger, described in the section titled “The Merger Agreement—Conditions” beginning on page 60, have been satisfied or waived in accordance with the Merger Agreement (other than those conditions that by their nature are to be satisfied at the Closing Date, but subject to the fulfillment or waiver of those conditions). However, the Closing Date will not occur on or prior to the Second Quarter Distribution.

Assuming timely satisfaction of the necessary closing conditions, the parties currently expect the Closing Date to occur in the third quarter of 2018. The Merger will become effective at the time when the certificate of

 

50

merger has been duly filed with the Secretary of State of the State of Delaware or at such later time as may be agreed by Cheniere and CQH in writing and specified in the certificate of merger (the Effective Time).

Merger Consideration

As a result of the Merger, Eligible Shares will be converted into the Merger Consideration.

At the Effective Time of the Merger, all of the Eligible Shares converted into the right to receive the Merger Consideration will cease to be outstanding, will be cancelled and will cease to exist, and each certificate or book-entry share will thereafter represent only the right to receive the Merger Consideration, the right, if any to receive cash in lieu of fractional shares and any dividends or other distributions and the right, if any, to receive payment of any declared but unpaid dividend or distribution, the record date for which is prior to the Effective Time, by CQH.

No fractional shares of CQH Common Stock will be issued upon the conversion of Eligible Shares. Any holder of Eligible Shares otherwise entitled to receive a fractional share of Cheniere Common Stock will be entitled to receive a cash payment, without interest, rounded to the nearest cent, equal to the product of the aggregated amount of the fractional share interest in shares of Cheniere Common Stock to which such holder would be entitled and an amount equal to the average of the volume-weighted average price per share of Cheniere Common Stock on the NYSE American (as reported by Bloomberg L.P. or, if not reported therein, in another authoritative source mutually selected by Cheniere and CQH) on each of the ten consecutive trading days ending with the complete trading day immediately prior to the Effective Time.

At the Effective Time of the Merger, each Excluded Share will cease to be outstanding, will be cancelled without payment of any consideration and will cease to exist.

At the Effective Time of the Merger, the CQH Voting Share will cease to be outstanding, will be cancelled without payment of any consideration and will cease to exist.

At the Effective Time of the Merger, each limited liability company interest of Merger Sub issued and outstanding immediately prior to the Effective Time will remain issued and outstanding from and after the Effective Time as the limited liability company interests of the Surviving Entity in the Merger. Cheniere will continue as the sole member of the Surviving Entity from and after the Effective Time.

Exchange Procedures

At or prior to the Effective Time, Cheniere will deposit with Computershare Trust Company, N.A. (the “Exchange Agent”), for the benefit of the holders of Eligible Shares, an aggregate number of shares of Cheniere Common Stock to be issued in uncertificated form or book-entry form comprising the amount required to be delivered by Cheniere in exchange for the Eligible Shares and an aggregate amount of cash comprising the estimated maximum aggregate amount of cash required to be paid in lieu of any fractional shares. In addition, Cheniere will deposit with the Exchange Agent, as necessary from time to time after the Effective Time, any dividends or other distributions, if any, to which the holders of Eligible Shares may be entitled, as further described in the section titled “The Merger Agreement—Dividends and Distributions” beginning on page 59.

Promptly after the Effective Time (and in any event within three business days thereafter), the Surviving Entity will cause the Exchange Agent to mail to each holder of record of any certificates or book-entry shares not held through The Depository Trust Company (“DTC”) notice advising such holders of the effectiveness of the Merger, including appropriate transmittal materials specifying that delivery will be effected, and risk of loss and title to the certificates or book-entry shares will pass only upon delivery of the certificates (or affidavits of loss in lieu of the certificates) or transfer of the book-entry shares to the Exchange Agent (including customary provisions with respect to delivery of an “agent’s message” with respect to book-entry shares), such materials to

 

51

be in such form and have such other provisions as Cheniere desires with approval of CQH (such approval not to be unreasonably withheld, conditioned or delayed) (the “Letter of Transmittal”), and instructions for surrendering the certificates (or affidavits of loss in lieu of the certificates) or transferring the book-entry shares to the Exchange Agent in exchange for the Merger Consideration, any cash in lieu of fractional shares of Cheniere Common Stock and any dividends or distributions, in each case, to which such holders are or may be entitled. With respect to book-entry shares held through DTC, Cheniere and CQH will cooperate to establish procedures with the Exchange Agent and DTC to ensure that the Exchange Agent will transmit to DTC or its nominees on the Closing Date (or if the Closing Date occurs after 11:30 a.m. (New York Time) on the Closing Date, on the first business day after the Closing Date), upon surrender of Eligible Shares held of record by DTC or its nominees in accordance with DTC’s customary surrender procedures, the Merger Consideration, any cash in lieu of fractional shares of Cheniere Common Stock and any dividends or distributions, in each case, to which the beneficial owners thereof are or may be entitled pursuant to the terms of the Merger Agreement.

Upon surrender to the Exchange Agent of a certificate, by physical surrender of such certificate (or affidavit of loss in lieu of a certificate), or a book-entry share, by book-receipt of an “agent’s message” by the Exchange Agent in connection with the transfer of book-entry shares, in accordance with the terms of the Letter of Transmittal and accompanying instructions or, with respect to book-entry shares held through DTC, in accordance with DTC’s customary procedures and such other procedures as agreed by CQH, Cheniere, the Exchange Agent and DTC, the holder of such certificate or book-entry share will be entitled to receive in exchange therefor, after giving effect to any required tax withholdings that number of whole shares of Cheniere Common Stock that such holder is entitled to receive and a check in the amount of any cash in lieu of fractional shares plus any unpaid non-stock dividends and any other dividends or other distributions that such holder has the right to receive.

No interest will be paid or accrued on any amount payable upon due surrender of Eligible Shares, and any certificate or ledger entry relating to book-entry shares formerly representing CQH Common Shares that have been so surrendered will be cancelled by the Exchange Agent.

In the event of a transfer of ownership of any certificate that is not registered in the transfer records of CQH, the proper number of shares of Cheniere Common Stock, together with a check for any cash in lieu of fractional shares (after giving effect to any required tax withholdings) to be paid upon due surrender of the certificate and any other dividends or distributions, may be issued and/or paid to such a transferee if the certificate formerly representing such Eligible Shares is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and to evidence that any applicable stock transfer taxes have been paid or are not applicable, in each case, in form and substance, reasonably satisfactory to the Exchange Agent. With respect to book-entry shares, payment of the applicable Merger Consideration and any cash in lieu of fractional shares and any dividends or other distributions will be made only to the person in whose name such book-entry shares are registered in the transfer books of CQH as of the Effective Time.

Termination of the Exchange Fund

Any portion of the exchange fund that remains unclaimed as of the date that is 180 calendar days after the Effective Time will be delivered to Cheniere. Thereafter, any holder of Eligible Shares will be entitled to look only to Cheniere for delivery of the Merger Consideration and payment of any cash, dividends and other distributions payable and/or issuable, as contemplated by the Merger Agreement, without any interest thereon. None of the Surviving Entity, Cheniere, the Exchange Agent or any other person will be liable to any former CQH Shareholder for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. If any Eligible Share has not been surrendered prior to the time that is immediately prior to the time at which Merger Consideration in respect of such Eligible Share would otherwise escheat to or become the property of any governmental entity, such amount will, to the extent permitted by applicable law, become the property of Cheniere free and clear of all claims or interest of any person previously entitled thereto.

 

52

Dividends and Distributions with Respect to Unexchanged CQH Common Shares

All shares of Cheniere Common Stock to be issued pursuant to the Merger will be deemed issued and outstanding as of the Effective Time and whenever a dividend or other distribution is declared by Cheniere in respect of the Cheniere Common Stock, the record date for which is at or after the Effective Time, that declaration will include dividends or other distributions in respect of all shares of Cheniere Common Stock issuable pursuant to the Merger Agreement. No dividends or other distributions in respect of the Cheniere Common Stock will be paid to any holder of any unsurrendered Eligible Share until the certificate (or affidavit of loss in lieu of the certificate) or book-entry share is surrendered for exchange. Subject to the effect of applicable laws, following such surrender, there will be issued and/or paid to the holder of record of the whole shares of Cheniere Common Stock issued in exchange for Eligible Shares, without interest, (a) at the time of such surrender, the dividends or other distributions with a record date and payment date after the Effective Time theretofore payable with respect to such whole shares of Cheniere Common Stock and not paid, and (b) at the appropriate payment date, the dividends or other distributions payable with respect to such whole shares of Cheniere Common Stock with a record date after the Effective Time but with a payment date subsequent to surrender.

Lost, Stolen or Destroyed Certificates

In the event any certificate will have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed and, if required by Cheniere, the posting by such person of a bond in customary amount as indemnity against any claim that may be made against it with respect to such certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed certificate the shares of Cheniere Common Stock and any cash, unpaid dividends or other distributions that would be payable or deliverable in respect thereof pursuant to the Merger Agreement had such lost, stolen or destroyed certificate been surrendered.

Withholding Rights

Each of Cheniere, the Surviving Entity and the Exchange Agent will be entitled to deduct and withhold from the consideration otherwise payable to any CQH Shareholder such amounts (in cash or shares of Cheniere Common Stock) as it is required to deduct and withhold with respect to the making of such payment under the Code or any other applicable state, local or foreign tax law. To the extent that amounts are so withheld by Cheniere, the Surviving Entity or the Exchange Agent, such withheld amounts will be timely remitted by Cheniere, the Surviving Entity or the Exchange Agent, as applicable, to the applicable governmental entity, and will be treated for all purposes of the Merger Agreement as having been paid to the CQH Shareholder in respect of which such deduction and withholding was made by Cheniere, the Surviving Entity or the Exchange Agent, as the case may be.

Appraisal Rights

In accordance with Section 18-210 of the DLLCA and Section 12.3(e) of the CQH LLC Agreement, no appraisal rights are available to CQH Shareholders in connection with the Merger.

Adjustments to Prevent Dilution

If, from the date of the Merger Agreement to the earlier of the Effective Time and termination of the Merger Agreement, the issued and outstanding CQH Common Shares or securities convertible or exchangeable into or exercisable for CQH Common Shares or the issued and outstanding shares of Cheniere Common Stock or securities convertible or exchangeable into or exercisable for shares of Cheniere Common Stock, will have been changed into a different number of shares or securities or a different class by reason of any subdivision, reclassification, split (including a reverse split), stock or share dividend or distribution, recapitalization, merger,

 

53

issuer tender or exchange offer, or other similar transaction, or a dividend or distribution payable in stock or share with a record date within such period will have been declared, then the Merger Consideration will be equitably adjusted to provide the CQH Shareholders and Cheniere the same economic effect as contemplated by the Merger Agreement prior to such event, and such items, as so adjusted will, from and after the date of such event, be the Merger Consideration.

Representations and Warranties

The Merger Agreement contains customary representations and warranties by CQH that are subject, in some cases, to specified expectations and qualifications contained in the Merger Agreement, in forms, statements, certifications, reports or documents filed with or furnished by CQH to the SEC (including the exhibits and schedules thereto) between December 31, 2016 and the date of the Merger Agreement or in the disclosure letter delivered by CQH to Cheniere in connection with the Merger Agreement. These representations and warranties relate to, among other things:

 

•

the organization, good standing and qualification to do business of CQH;

 

•

the capital structure of CQH, including regarding:

 

•

the number of CQH Common Shares outstanding;

 

•

the CQH Voting Share outstanding;

 

•

the due authorization and validity of the CQH Common Shares;

 

•

the absence of CQH Common Shares reserved for issuance;

 

•

the absence of preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, or similar rights; and

 

•

the absence of any outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or are convertible into or exercisable for securities having the right to vote) with the CQH Shareholders on any matter;

 

•

the corporate power, authority and approval relating to the execution, delivery and performance of CQH’s obligations under the Merger Agreement, subject to the approval of the Merger Agreement by the majority of the outstanding CQH Common Shares entitled to vote on the matter;

 

•

the CQH Conflicts Committee’s unanimous determination that the Merger Agreement and Merger are fair and reasonable to, and in the best interest of, CQH and CQH’s public shareholders (as defined in the Merger Agreement);

 

•

the CQH Board’s unanimous determination that the Merger Agreement and Merger are fair and reasonable to, and in the best interest of, CQH and CQH’s public shareholders (as defined in the Merger Agreement);

 

•

government filings, notices, reports, consents, registrations, approvals, permits or authorizations in connection with the execution, delivery and performance of the Merger Agreement or the consummation of the Merger;

 

•

filings with the SEC since December 31, 2016 and the financial statements included therein;

 

•

the absence of a Material Adverse Effect (as defined in the Merger Agreement) with respect to CQH since December 31, 2017;

 

•

the absence of certain legal proceedings and government orders against CQH or its subsidiaries;

 

•

compliance with applicable laws, the absence of governmental investigations and the possession of and compliance with licenses and permits necessary to the conduct of business;

 

54

•

certain material contracts;

 

•

the inapplicability of anti-takeover statutes;

 

•

tax matters;

 

•

opinion of financial advisor; and

 

•

the absence of undisclosed investment banker, broker or finders fees.

The Merger Agreement also contains customary representations and warranties by Cheniere and Merger Sub that are subject, in some cases, to specified expectations and qualifications contained in the Merger Agreement, in forms, statements, certifications, reports or documents filed with or furnished by CQH to the SEC (including the exhibits and schedules thereto) between December 31, 2016 and the date of the Merger Agreement. These representations and warranties relate to, among other things:

 

•

the organization, good standing and qualification to do business of Cheniere and Merger Sub;

 

•

the capital structure of Cheniere, including regarding:

 

•

the number of shares of Cheniere Common Stock and preferred stock issued and outstanding;

 

•

the due authorization and validity of all outstanding Cheniere Common Stock;

 

•

the number of shares of Cheniere Common Stock reserved for issuance;

 

•

the absence of preemptive or other outstanding rights, options, warrants, conversion rights, stock appreciation rights, redemption rights, repurchase rights, agreements, arrangements, calls, or similar rights; and

 

•

the absence of any outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or are convertible into or exercisable for securities having the right to vote) with the holders of shares of Cheniere Common Stock on any matter;

 

•

the corporate power, authority and approval relating to the execution, delivery and performance of Cheniere’s and Merger Sub’s obligations under the Merger Agreement;

 

•

government filings, notices, reports, consents, registrations, approvals, permits or authorizations in connection with the execution, delivery and performance of the Merger Agreement or the consummation of the Merger;

 

•

filings with the SEC since December 31, 2016 and the financial statements included therein;

 

•

the absence of certain legal proceedings and government orders against Cheniere and its subsidiaries (other than CQH and its subsidiaries);

 

•

compliance with applicable laws, the absence of governmental investigations and the possession of and compliance with licenses and permits necessary to the conduct of business;

 

•

certain material contracts;

 

•

capitalization of Merger Sub;

 

•

tax matters;

 

•

real property and rights-of-way;

 

•

environmental matters;

 

•

absence of a Material Adverse Effect with respect to Cheniere since December 31, 2017 and the absence of any material damage, destruction or loss to any material portion of the assets of Cheniere and its subsidiaries (other than CQH and its subsidiaries) since December 31, 2017;

 

•

insurance;

 

55

•

the condition of the assets of Cheniere and its subsidiaries (other than CQH and its subsidiaries); and

 

•

the absence of undisclosed investment banker, broker or finders fees.

Many of the representations and warranties contained in the Merger Agreement are qualified by a “Material Adverse Effect” standard (that is, they would not be deemed untrue or incorrect unless their failure to be true and correct individually or in the aggregate, has had or would reasonably be expected to have a Material Adverse Effect on Cheniere or CQH, as applicable) and/or by a general materiality standard.

A “Material Adverse Effect” means with respect to CQH or Cheniere, as applicable, any change, event, occurrence or effect that, individually or taken together with any other changes, events, occurrences or effects, is, or would reasonably be expected to be, materially adverse to the condition (financial or otherwise), liabilities, business, assets, properties or results of operations of CQH and its subsidiaries, taken as a whole, or Cheniere and its subsidiaries (other than CQH and its subsidiaries), taken as a whole, as applicable, excluding any effects arising out of, resulting from or attributable to any of the following:

 

•

any changes generally affecting domestic or international economic conditions or domestic or international financial, capital, credit, debt or securities markets;

 

•

any changes in conditions generally affecting the natural gas liquefaction and distribution industry;

 

•

any change in the market price or trading volume of any of CQH’s or Cheniere’s securities (provided that this exception will not prevent or otherwise affect a determination that any change, effect, or development underlying such change has resulted in or contributed to a Material Adverse Effect);

 

•

any failure, in and of itself to meet any internal or publicly available projections, forecasts, estimates or predictions (provided that this exception will not prevent or otherwise affect a determination that any change, effect, or development underlying such failure has resulted in or contributed to a Material Adverse Effect);

 

•

the execution, delivery and performance of the Merger Agreement, or the public announcement or pendency of the Merger Agreement, the merger or any of the other transactions contemplated by the Merger Agreement;

 

•

any changes or proposed changes in U.S. generally accepted accounting principles or in laws applicable to the CQH or Cheniere or the interpretation, application or enforcement thereof;

 

•

any geopolitical conditions, the outbreak or escalation of hostilities, any acts of war, sabotage, terrorism or military actions, or epidemics, pandemics, earthquakes, hurricanes, tornadoes or other natural disasters or calamities; or

 

•

any action required to be taken pursuant to or in compliance with the Merger Agreement or by law;

except that any change, effect, event or occurrence referred to in the first, second, sixth and seventh bullets immediately above will be taken into account for purposes of determining whether a Material Adverse Effect has occurred to the extent, and only to the extent, that such change, effect, event or occurrence has a materially disproportionate adverse effect on CQH and its subsidiaries, taken as a whole, or Cheniere and its subsidiaries (other than CQH and its subsidiaries), taken as a whole, as applicable, relative to the adverse effect on other companies in the natural gas liquefaction and distribution industry (in which case only the incremental disproportionate adverse impact may be taken into account in determining whether there has been a Material Adverse Effect).

“Material Adverse Effect” also means with respect to CQH or Cheniere, as applicable, any change, event, occurrence or effect that, individually or taken together with any other changes, events, occurrences or effects, prevents, or would reasonably be expected to prevent, materially delay or impair the ability of CQH or Cheniere and Merger Sub, as applicable, to consummate the Merger or the other transactions contemplated by the Merger Agreement.

 

56

Interim Operations

Under the terms of the Merger Agreement, CQH and Cheniere have agreed, after the date of the Merger Agreement and prior to the earlier of the termination of the Merger Agreement and the Effective Time, except as required by applicable law or as otherwise expressly required by the Merger Agreement, not to, and cause its respective subsidiaries not to, in each case without the prior written consent of CQH, with respect to actions to be taken by the Cheniere and its subsidiaries (other than CQH and its subsidiaries), or Cheniere, with respect to actions to be taken by CQH or its subsidiaries (such consent will not be unreasonably withheld, delayed or conditioned):

 

•

make any material change to the nature of its business and operations;

 

•

make any change to its organizational documents as in effect on the date of the Merger Agreement in any manner that would reasonably be expected to prohibit or materially impede or delay the Merger or the consummation of the other transactions contemplated by the Merger Agreement, or adversely affect in a material way the rights of holders of its securities or the securities of any other party to the Merger Agreement;

 

•

waive, release, assign, settle or compromise any claim, action or proceeding, including any state or federal regulatory proceeding seeking damages or injunction or other equitable relief, which waiver, release, assignment, settlement or compromise would reasonably be expected to result in a Material Adverse Effect on CQH or Cheniere, as applicable;

 

•

recommend, propose, announce, adopt or vote to adopt a plan of complete or partial dissolution or liquidation, in each case, that would prevent or materially impede or delay the ability of the parties to satisfy any of the conditions to, or the consummation of, the transactions set forth in the Merger Agreement or adversely affect in a material way the rights of holders of the securities of any party to the Merger Agreement;

 

•

make any material change to its accounting principles or practices, except as may be required as a result of a change in accounting principles that are generally accepted in the United States of America (“GAAP”); or

 

•

agree, authorize or commit to do any of the foregoing.

In addition, from the date of the Merger Agreement until the earlier of the Closing Date or the termination of the Merger Agreement in accordance with its terms, Cheniere has agreed that it will not, and it will cause its subsidiaries not to, exercise any right to purchase CQH Common Shares pursuant to the CQH LLC Agreement.

Reasonable Best Efforts; Filings; Information Supplied

CQH and Cheniere have agreed to cooperate with each other and use (and cause their respective subsidiaries to use) their respective reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on their part under the Merger Agreement and applicable law to consummate and make effective the Merger and the other transactions contemplated by the Merger Agreement as soon as practicable, including preparing and filing as promptly as practicable all documentation to effect all necessary notices, reports and other filings and to obtain as promptly as practicable all consents, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any third party and/or any governmental entity in order to consummate the Merger or any of the other transactions contemplated by the Merger Agreement.

CQH and Cheniere have agreed to cooperate in the preparation of this registration statement, of which this consent solicitation/prospectus forms a part, and to use their respective reasonable best efforts to have the registration statement declared effective under the Securities Act as promptly as practicable after such filing and to maintain such effectiveness for as long as necessary to consummate the Merger and the other transactions

 

57

contemplated thereby. CQH will promptly thereafter mail the consent solicitation/prospectus, which will include a form of consent that may be executed by CQH Shareholders in connection with the approval of the Merger Agreement and the transactions contemplated thereby, including the Merger, by written consent without a meeting, to CQH Shareholders. Cheniere will also use its reasonable best efforts to satisfy prior to the effective date of the registration statement all necessary state securities law or “blue sky” notice requirements in connection with the Merger and to consummate the other transactions contemplated by the Merger Agreement.

CQH and Cheniere have agreed to, upon request by the other, furnish the other with all information concerning itself, its subsidiaries, directors, officers and stockholders and such other matters as may be reasonably necessary or advisable in connection with any statement, filing, notice or application made by or on behalf of Cheniere, CQH or any of their respective subsidiaries to any third party and/or any governmental entity in connection with the transactions contemplated by the Merger Agreement, including the Merger, and to keep the other apprised of the status of matters relating to completion of the Merger and the other transactions contemplated by the Merger Agreement.

Stock Exchange Listing and Delisting

Cheniere will use its best efforts to cause the shares of Cheniere Common Stock to be issued in the Merger to be approved for listing on the NYSE American subject to official notice of issuance, prior to the Closing Date. Prior to the Closing Date, CQH will cooperate with Cheniere and use reasonable best efforts to take, or cause to be taken, all actions, and do or cause to be done all things, reasonably necessary, proper or advisable on its part under applicable law and rules and policies of the NYSE American to enable the delisting by Cheniere and the Surviving Entity of the CQH Common Shares from the NYSE American and the deregistration of the CQH Common Shares under the Exchange Act as promptly as practicable after the Effective Time.

Shareholder Litigation

Under the terms of the Merger Agreement, CQH will give Cheniere the opportunity to participate in the defense or settlement of any shareholder litigation against CQH and/or the members of the CQH Board relating to the Merger, the Merger Agreement or any of the transactions contemplated by the Merger Agreement; however, CQH will in any event control such defense and/or settlement. CQH has agreed not to settle any such litigation without the consent of Cheniere (such consent not to be unreasonably withheld, conditioned or delayed).

Expenses

Whether or not the Merger is consummated, all costs and expenses incurred in connection with the Merger Agreement, including legal fees, accounting fees, financial advisory fees and other professional and non-professional fees and expenses, will be paid by the party incurring such expenses, except that Cheniere will pay for any filing fees with respect to the registration statement of which this consent solicitation/prospectus forms a part, and the costs of printing and mailing of this consent solicitation/prospectus.

Indemnification; Directors’ and Officers’ Insurance

Cheniere and the Surviving Entity have agreed that, from and after the Effective Time, it will indemnify and hold harmless, to the fullest extent permitted under applicable law (and Cheniere and the Surviving Entity will also advance expenses as incurred to the fullest extent permitted under applicable law), each Indemnified Person against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any proceeding, whether civil, criminal, administrative or investigative, arising out of or related to such Indemnified Person’s service as a director, officer or employee of CQH or services performed by such person at the request of CQH (including acting, at the request of CQH, as a director, officer, employee, partner, manager, fiduciary or trustee of any other person) at or prior to the Effective Time,

 

58

whether asserted or claimed prior to, at or after the Effective Time, including in connection with the transactions contemplated by the Merger Agreement and actions to enforce any advancement right of any Indemnified Person.

Prior to the Effective Time of the Merger, CQH will and, if CQH is unable to, Cheniere will cause the Surviving Entity as of the Effective Time to, obtain and fully pay the premium for “tail” insurance policies for the extension of the directors’ and officers’ liability coverage of CQH’s existing directors’ and officers’ insurance policies, and CQH’s existing fiduciary liability insurance policies, in each case for a claims reporting or discovery period of six years from and after the Effective Time (the “Tail Period”) from one or more insurance carriers with the same or better credit rating as CQH’s insurance carrier as of the date of the Merger Agreement with respect to directors’ and officers’ liability insurance and fiduciary liability insurance (collectively, “D&O Insurance”) with terms, conditions, retentions and limits of liability that are at least as favorable to the insureds as CQH’s existing policies with respect to matters existing or occurring at or prior to the Effective Time (including in connection with the Merger Agreement or the transactions contemplated thereby). If CQH and the Surviving Entity for any reason fail to obtain such “tail” insurance policies as of the Effective Time, the Surviving Entity will, and Cheniere will cause the Surviving Entity to, continue to maintain in effect for the Tail Period the D&O Insurance in place as of the date of the Merger Agreement with terms, conditions, retentions and limits of liability that are at least as favorable to the insureds as provided in CQH’s existing policies as of the date of the Merger Agreement, or alternatively, the Surviving Entity will, and Cheniere will cause the Surviving Entity to, purchase comparable D&O Insurance for the Tail Period with terms, conditions, retentions and limits of liability that are at least as favorable as provided in CQH’s existing policies as of the date of the Merger Agreement; provided, however, that in no event will the aggregate cost of the D&O Insurance exceed during the Tail Period an amount equal to six multiplied by 300% of the current aggregate annual premium paid by CQH for such purpose; and provided, further, that if the cost of such insurance coverage exceeds such amount, the Surviving Entity will obtain a policy with the greatest coverage available for a cost not exceeding such amount.

If Cheniere, the Surviving Entity or any of its successors or assigns consolidates with or merges into any other person and will not be the continuing or surviving entity of such consolidation or merger, or transfers or conveys all or substantially all of its properties and assets to any person, then proper provision will be made so that the successors and assigns of Cheniere or the Surviving Entity, as the case may be, will assume the indemnification and D&O Insurance obligations.

The rights of each Indemnified Person will be in addition to any rights such person may have under the CQH LLC Agreement, under the Limited Liability Company Agreement of the Surviving Company, under Delaware law or any other applicable law, or under any other agreement of such Indemnified Person with CQH. These rights will survive consummation of the merger and are intended to benefit, and will be enforceable by, each Indemnified Person.

Dividends and Distributions

CQH and Cheniere will coordinate to designate the record date for the Second Quarter Distribution so that the record date for any such dividend precedes the Effective Time. The Second Quarter Distribution will not be less than $0.56 per CQH Common Share without approval of the CQH Conflicts Committee.

Conflicts Committee

Prior to the earlier of the Effective Time and the termination of the Merger Agreement, none of Cheniere, CQH or any of their subsidiaries will, without the consent of the CQH Conflicts Committee, eliminate the CQH Conflicts Committee, or revoke or diminish the authority of the CQH Conflicts Committee, or remove or cause the removal (without cause) of any director of the CQH Board that is a member of the CQH Conflicts Committee either as a member of the CQH Board or the CQH Conflicts Committee, without the affirmative vote of the CQH Board, including the affirmative vote of a majority of the members of the CQH Conflicts Committee.

 

59

Reorganization Treatment

Cheniere, Merger Sub and CQH intend that, for U.S. federal income tax purposes, the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. None of Cheniere, Merger Sub or CQH will, nor will they permit their subsidiaries to, take any action, and Cheniere, Merger Sub and CQH will not, and will ensure that their subsidiaries do not, fail to take any action, which action or failure would prevent or impede the Merger from qualifying (or reasonably would be expected to cause the Merger to fail to qualify) as a “reorganization” within the meaning of Section 368(a) of the Code.

Conditions

Under the Merger Agreement, the respective obligation of each party to effect the Merger is subject to the satisfaction or waiver at or prior to the Effective Time of each of the following conditions:

 

•

Member Approval. The Merger Agreement must have been duly approved in accordance with applicable law by written consent without a meeting in accordance with Section 11.10 of the CQH LLC Agreement by members of CQH holding CQH Common Shares constituting the affirmative vote or consent of holders of a majority of the outstanding CQH Common Shares entitled to vote on such matter (the “Required Consent”) and such written consent must not have been amended, modified, withdrawn, terminated or revoked.

 

•

No Orders. There must not have been enacted, issued, promulgated, enforced or entered any order by any court or other governmental entity of competent jurisdiction.

 

•

NYSE American. The shares of Cheniere Common Stock issuable to the holders of Eligible Shares pursuant to the Merger Agreement must have been authorized for listing on the NYSE American, subject to official notice of issuance.

 

•

Registration Statement. The registration statement must have become effective in accordance with the provisions of the Securities Act and must not be the subject of any stop order issued by the SEC and/or any proceedings for that purpose commenced or be threatened by the SEC unless subsequently withdrawn.

The obligations of Cheniere and Merger Sub to effect the Merger are also subject to the satisfaction or waiver by Cheniere at or prior to the Effective Time of the following conditions:

 

•

Representations and Warranties.

 

•

The representations and warranties of CQH set forth in the Merger Agreement that are qualified by reference to Material Adverse Effect must be true and correct as of the date of the Merger Agreement and as of the Closing Date as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty will be true and correct as of such earlier date);

 

•

the representations and warranties of CQH set forth in the Merger Agreement that are not qualified by reference to Material Adverse Effect will be true and correct as of the date of the Merger Agreement and as of the Closing Date as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty will be true and correct as of such earlier date); and

 

•

the conditions set forth in the above will be deemed to have been satisfied even if any representations and warranties of CQH (other than certain representations and warranties with respect to corporate authority and fairness and takeover statutes, which must be true and correct in all material respects, and organization and good standing and capital structure, which must be true and correct in all respects, other than any de minimis inaccuracies) are not so true and correct

 

60

unless the failure of such representations and warranties of CQH to be so true and correct, would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to CQH.

 

•

Performance of Obligations. CQH will have performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Closing Date.

 

•

No Material Adverse Effect. Since the date of the Merger Agreement, there must not have occurred any change, event, occurrence or effect that has had or would reasonably be expected to have a Material Adverse Effect with respect to CQH.

 

•

Certificate. Cheniere must have received at or before the Closing Date a certificate signed on behalf of CQH by an executive officer of CQH to the effect that such executive officer has read the conditions to the obligations of Cheniere and Merger Sub, and those conditions have been satisfied.

The obligation of CQH to effect the Merger is also subject to the satisfaction or waiver by CQH at or prior to the Effective Time of the following conditions:

 

•

Representations and Warranties.

 

•

The representations and warranties of Cheniere and Merger Sub set forth in the Merger Agreement that are qualified by reference to Material Adverse Effect will be true and correct as of the date of the Merger Agreement and as of the Closing Date as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date);

 

•

the representations and warranties of Cheniere and Merger Sub set forth in the Merger Agreement that are not qualified by reference to Material Adverse Effect will be true and correct as of the date of the Merger Agreement and as of the Closing Date as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty will be true and correct as of such earlier date); and

 

•

the conditions set forth above will be deemed to have been satisfied even if any representations and warranties of Cheniere (other than certain representations with respect to corporate authority, which must be true and correct in all material respects, and with respect to organization and good standing and capital structure, which must be true and correct in all respects, other than any de minimis inaccuracies) are not so true and correct unless the failure of such representations and warranties of Cheniere and Merger Sub to be so true and correct, would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect with respect to Cheniere.

 

•

Performance of Obligations. Each of Cheniere and Merger Sub will have performed in all material respects all obligations required to be performed by it under the Merger Agreement at or prior to the Closing Date.

 

•

No Material Adverse Effect. Since the date of the Merger Agreement, there must not have occurred any change, event, occurrence or effect that has had or would reasonably be expected to have a Material Adverse Effect with respect to Cheniere.

 

•

Tax Opinion. CQH must have received a written opinion of Sullivan & Cromwell LLP, in form and substance reasonably satisfactory to the CQH Board and dated as the Closing Date, to the effect that, on the basis of certain facts, representations and assumptions set forth in such opinion and subject to the qualifications and limitations as may be set forth therein, for United States federal income tax purposes, the merger will be treated as a reorganization qualifying under Section 368(a) of the Code.

 

•

Certificate. CQH must have received at the closing a certificate signed on behalf of Cheniere by an executive officer of Cheniere to the effect that such executive officer has read conditions and obligations of CQH and those conditions have been satisfied.

 

61

Termination

The Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time, whether before or after the Required Consent has been obtained, by mutual written consent of CQH and Cheniere by action of their respective boards of directors.

The Merger Agreement may also be terminated and the Merger may be abandoned at any time prior to the Effective Time by action of the Cheniere Board or CQH Board if:

 

•

the Merger has not been consummated by the Termination Date; or

 

•

any order permanently restraining, enjoining or otherwise prohibiting consummation of the Merger has become final and non-appealable;

provided that the right to terminate the Merger Agreement as described above will not be available to any party that has breached in any material respect its obligations under the Merger Agreement in any manner that will have proximately contributed to the occurrence of the failure of a condition to the consummation of the Merger.

The Merger Agreement may be terminated by CQH and the Merger may be abandoned at any time prior to the Effective Time by action of the CQH Board if there has been a breach of any representation, warranty, covenant or agreement made by Cheniere or Merger Sub in the Merger Agreement, or any such representation and warranty will have become untrue after the date of the Merger Agreement, such that certain conditions to obligation of CQH would not be satisfied and such breach or condition is not curable or, if curable, is not cured within the earlier 30 days after written notice thereof is given by CQH to Cheniere and the Termination Date.

The Merger Agreement may be terminated by Cheniere and the Merger may be abandoned at any time prior to the Effective Time by action of the Cheniere Board if there has been a breach of any representation, warranty, covenant or agreement made by CQH in the Merger Agreement, or any such representation and warranty has become untrue after the date of the Merger Agreement, such that certain conditions to obligations of Cheniere and Merger Sub would not be satisfied and such breach or condition is not curable or, if curable, is not cured within the earlier of 30 days after written notice thereof is given by Cheniere to CQH and the Termination Date.

In the event of termination of the Merger Agreement and the abandonment of the Merger, the Merger Agreement will become void and of no effect with no liability to any person on the part of any party thereto (or of any of its directors, officers, employees, investment bankers, attorneys, accountants and other advisors or representatives or affiliates). However, no such termination will relieve any party to the Merger Agreement of any liability or damages to the other party to the Merger Agreement resulting from any knowing and intentional breach of the Merger Agreement.

Modification or Amendment

At any time prior to the Effective Time, the parties may modify or amend the Merger Agreement, solely by a written agreement executed and delivered by duly authorized officers of the respective parties. However, the CQH Board may not take or authorize any such action unless it has first referred such action to the CQH Conflicts Committee for its consideration, and permitted the CQH Conflicts Committee not less than three business days to make a recommendation to the CQH Board with respect thereto. In addition, following receipt of the affirmative vote or consent of holders of a majority of the outstanding Cheniere Common Stock entitled to vote on the Merger Agreement, there will be no amendment or change to the provisions of the Merger Agreement which by applicable law or stock exchange rule would require further approval by the CQH Shareholders, without such approval.

Waiver of Conditions

The conditions to each of the parties’ obligations to consummate the Merger are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable law. Any such

 

62

waiver will only be effective if made in writing. In addition, the CQH Board may not take or authorize any such action unless it has first referred such action to the CQH Conflicts Committee for its consideration, and permitted the CQH Conflicts Committee not less than three business days to make a recommendation to the CQH Board with respect thereto.

Support Agreement

Concurrently with the execution of the Merger Agreement, Cheniere and CQH entered into the Support Agreement, pursuant to which, subject to the terms and conditions therein, Cheniere has agreed to deliver a written consent covering all of the CQH Common Shares beneficially owned by Cheniere within two business days after the registration statement of which this consent solicitation/prospectus forms a part becomes effective under the Securities Act, approving the Merger, Merger Agreement and any other matters necessary for the consummation of the Merger and the other transactions contemplated in the Merger Agreement.

The Support Agreement also generally prohibits Cheniere from transferring its CQH Common Shares. The Support Agreement terminates on the earliest to occur of the Effective Time of the Merger, termination of the Merger Agreement or mutual written agreement of the parties to terminate the Support Agreement.

 

63

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT/DIRECTORS OF CQH

To CQH’s knowledge, the following tables set forth certain information regarding the beneficial ownership of CQH Common Shares as of the close of business on August 15, 2018 (except as noted in the footnotes below) and with respect to: each person known by CQH, based on public filings, to beneficially own 5% or more of the outstanding shares of CQH Common Shares; each member of the CQH Board; and each named executive officer of CQH.

CQH has determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, CQH believes, based on the information furnished to CQH, that the persons and entities named in the table below have sole voting and investment power with respect to all of the CQH Common Shares that he, she or it beneficially owns.

Applicable percentage ownership and voting power is based on 231,700,000 CQH Common Shares outstanding as of August 15, 2018.

Owners of More than Five Percent of Outstanding Shares

The following table shows the beneficial owner known by CQH to own more than five percent of the total number of CQH Common Shares as of August 15, 2018.

 

Name of Beneficial Owner		CQH Common Shares Beneficially Owned				Percentage of CQH Common Shares Beneficially Owned
Cheniere (1)			212,953,991				91.9	%

 

(1)	Cheniere also owns the CQH Voting Share.

Security Ownership of Directors and Executive Officers:

The following table sets forth the beneficial ownership of CQH Common Shares outstanding as of August 15, 2018 and held by each director, executive officer and all directors and executive officers of CQH as a group.

The table also presents the ownership of Cheniere Partner Units and shares of Cheniere Common Stock owned of record or beneficially as of August 15, 2018, by each director, named executive officer and all directors and executive officers of CQH as a group. As of August 15, 2018, Cheniere owned 100% of the general partner interest in Cheniere Partners and approximately 91.9% of CQH, which owns a 48.6% limited partner interest in Cheniere Partners.

 

		CQH								Cheniere Partners								Cheniere
Name of Beneficial Owner		Amount and Nature of Beneficial Ownership				Percent of Class				Amount and Nature of Beneficial Ownership (1)				Percent of Class				Amount and Nature of Beneficial Ownership				Percent of Class
Jack A. Fusco			—				—	%			—				—	%			597,166				*
Michael J. Wortley			—				—				—				—				468,788				*
Anatol Feygin			—				—				—				—				116,091				*
Doug Shanda			—				—				2,850				*				74,693				*
Jim D. Deidiker			—				—				—				—				—				—
Jonathan S. Gross			4,500				*	%			7,500				*				26,000				*
Zurab S. Kobiashvili			—				—				1,100				*				—				—
All current directors and executive officers as a group (7 persons)			4,500				*	%			11,450				*	%			1,324,398				*	%

 

*	Less than 1%

(1)	None of CQH’s directors or executive officers owned any Cheniere Partners Units other than common units.

 

64

DESCRIPTION OF CHENIERE COMMON STOCK

The following is a summary of the material terms and rights of Cheniere Common Stock. You should refer to the applicable provisions of Cheniere Certificate of Incorporation and Cheniere Bylaws, and the documents incorporated into this consent solicitation/prospectus, for a complete statement of the terms and rights of Cheniere Common Stock.

As of August 15, 2018, Cheniere’s authorized capital stock was 485,000,000 shares, which included 480,000,000 shares authorized as common stock, $0.003 par value, and 5,000,000 shares authorized as preferred stock, $0.0001 par value. As of August 15, 2018, Cheniere had 248,166,804 shares of common stock outstanding. There were no shares of preferred stock outstanding as of such date.

Listing

Cheniere Common Stock is listed on the NYSE American under the symbol “LNG.”

Dividends

Subject to the rights of holders of preferred stock, Cheniere Common Stockholders may receive dividends when declared by the Cheniere Board. Dividends may be paid in cash, stock or another form.

Fully Paid

All outstanding shares of Cheniere Common Stock are fully paid and non-assessable upon issuance.

Voting Rights

Cheniere Common Stockholders are entitled to one vote in the election of directors and other matters for each share of Cheniere Common Stock owned. Cheniere Common Stockholders are not entitled to preemptive or cumulative voting rights.

Other Rights

Cheniere Common Stockholders will be notified by Cheniere of any Cheniere Stockholders’ meetings in accordance with applicable law. If Cheniere liquidates, dissolves or winds up its business, either voluntarily or not, Cheniere Common Stockholders will share equally in the assets remaining after Cheniere pays its creditors and preferred stockholders. There are no redemption or sinking fund provisions applicable to the Cheniere Common Stock.

Transfer Agent and Registrar

The transfer agent and registrar for the Cheniere Common Stock is Computershare Trust Company, N.A. located in Providence, Rhode Island.

Certain Provisions of the Cheniere Certificate of Incorporation, Cheniere Bylaws and Law

The Cheniere Certificate of Incorporation and Cheniere Bylaws contain provisions that may render more difficult possible takeover proposals to acquire control of Cheniere and make removal of Cheniere’s management more difficult. Below is a description of certain of these provisions in the Cheniere Certificate of Incorporation and Cheniere Bylaws.

The Cheniere Certificate of Incorporation authorizes a class of undesignated preferred stock consisting of 5,000,000 shares. Additional shares of preferred stock may be issued from time to time in one or more series, and

 

65

the Cheniere Board, without further approval of the Cheniere Stockholders, is authorized to fix the designations, powers, preferences and rights applicable to each series of preferred stock. The purpose of authorizing the Cheniere Board to determine such designations, powers, preferences and rights is to allow such determinations to be made by the Cheniere Board instead of the Cheniere Stockholders and to avoid the expense of, and eliminate delays associated with, a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, adversely affect the voting power of the holders of Cheniere Common Stock and, under some circumstances, make it more difficult for a third party to gain control of Cheniere.

The Cheniere Certificate of Incorporation provides that any action required or permitted to be taken by the Cheniere Stockholders must be taken at an annual or special meeting of stockholders and not by written consent.

The Cheniere Bylaws permit holders of record of at least 50.1% of the outstanding shares of Cheniere Common Stock to call a special meeting of stockholders if such holders comply with the requirements set forth in the Cheniere Bylaws.

The Cheniere Bylaws contain specific procedures for stockholder nomination of directors. These provisions require advance notification that must be given in accordance with the provisions of the Cheniere Bylaws. The procedure for stockholder nomination of directors may have the effect of precluding a nomination for the election of directors at a particular meeting if the required procedure is not followed.

The Cheniere Certificate of Incorporation requires the vote of at least 66 2/3% of all of the shares of capital stock of Cheniere which are entitled to vote, voting together as a single class, to take stockholder action to alter, amend, rescind or repeal any of the Cheniere Bylaws, or to alter, amend, rescind or repeal provisions of the Cheniere Certificate of Incorporation or to adopt any provision inconsistent therewith relating to the inability of stockholders to act by written consent, the ability of the Cheniere Board to adopt, alter, amend and repeal the Cheniere Bylaws and the supermajority voting provision. The “supermajority” voting provisions may discourage or deter a person from attempting to obtain control of Cheniere by making it more difficult to amend some provisions of the Cheniere Certificate of Incorporation or for Cheniere Stockholders to amend any provision of the Cheniere Bylaws, whether to eliminate provisions that have an anti-takeover effect or those that protect the interests of minority stockholders.

Although Section 214 of the DGCL provides that a corporation’s certificate of incorporation may provide for cumulative voting for directors, the Cheniere Certificate of Incorporation does not provide for cumulative voting. As a result, in a non-contested election of directors, directors are elected by a vote of the majority of the votes cast with respect to that director’s election; in a contested election of directors, directors are elected by a vote of the plurality of the votes cast.

As a Delaware corporation, Cheniere is subject to Section 203, or the business combination statute, of the DGCL. Under the business combination statute of the DGCL, a corporation is generally restricted from engaging in a business combination (as defined in Section 203 of the DGCL) with an interested stockholder (defined generally as a person owning 15% or more of the corporation’s outstanding voting stock) for a three-year period following the time the stockholder became an interested stockholder. This restriction applies unless:

 

•

prior to the time the stockholder became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

 

•

the interested stockholder owned at least 85% of the voting stock of the corporation upon completion of the transaction which resulted in the stockholder becoming an interested stockholder (excluding stock held by the corporation’s directors who are also officers and by the corporation’s employee stock plans, if any, that do not provide employees with the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer); or

 

66

•

at or subsequent to the time the stockholder became an interested stockholder, the business combination was approved by the board of directors of the corporation and authorized by the affirmative vote, at an annual or special meeting, and not by written consent, of at least 66 2/3% of the outstanding voting shares of the corporation, excluding shares held by that interested stockholder.

The provisions of the business combination statute of the DGCL do not apply to a corporation if, subject to certain requirements specified in Section 203(b) of the DGCL, the certificate of incorporation or bylaws of the corporation contain a provision expressly electing not to be governed by the provisions of the statute or the corporation does not have voting stock listed on a national securities exchange or held of record by more than 2,000 stockholders. Cheniere has not adopted any provision in the Cheniere Certificate of Incorporation or Cheniere Bylaws electing not to be governed by the business combination statute of the DGCL. As a result, the statute is applicable to business combinations involving Cheniere.

Standstill Agreement

On August 21, 2015, Cheniere entered into a Nomination and Standstill Agreement (the “Standstill Agreement”) with Icahn Capital LP and certain affiliates of Icahn Capital LP (collectively, the “Icahn Group”), pursuant to which the Icahn Group agreed to certain standstill provisions and the Company agreed to increase the size of the Cheniere Board from nine to eleven members, appoint the Icahn Group designees to the Cheniere Board, and, so long as an Icahn Group designee is a member of the Cheniere Board, not expand the Cheniere Board to more than 11 members.

 

67

COMPARISON OF RIGHTS OF CHENIERE STOCKHOLDERS AND CQH SHAREHOLDERS

This section describes the material differences between the rights of Cheniere Stockholders and the rights of CQH Shareholders. Cheniere and CQH are each formed under the laws of the State of Delaware and, accordingly, the rights of Cheniere Stockholders and CQH Shareholders are both governed by the laws of the State of Delaware.

The differences between the rights of Cheniere Stockholders and CQH Shareholders result from differences between the organizational documents of Cheniere and CQH, and the different type of corporate structure between Cheniere and CQH. Cheniere is a corporation and CQH is a limited liability company. Ownership interests in a limited liability company are fundamentally different from ownership interests in a corporation. The rights of Cheniere Stockholders are governed by the Cheniere Certificate of Incorporation and Cheniere Bylaws and the DGCL. The rights of CQH Shareholders are governed by the CQH LLC Agreement and the DLLCA.

As a result of the Merger, CQH Shareholders that receive Merger Consideration in respect of their shares will become holders of shares of Cheniere Common Stock. Accordingly, once the Merger is completed, the rights of CQH Shareholders as holders of Cheniere Common Stock will be governed by the Cheniere Certificate of Incorporation and the Cheniere Bylaws and the DGCL. There are many differences between the rights of CQH Shareholders and the rights of Cheniere Stockholders. Some of these, such as distribution/dividend and voting rights, are significant.

The following description summarizes the material differences that may affect the rights of Cheniere Common Stockholders and CQH Shareholders but does not purport to be a complete statement of all those differences, or a complete description of the specific provisions referred to in this summary. The identification of specific differences is not intended to indicate that other equally significant or more significant differences do not exist. CQH Shareholders should read carefully the relevant provisions of the Cheniere Certificate of Incorporation and the Cheniere Bylaws and the CQH LLC Agreement. Capitalized terms used herein and not otherwise defined herein are used herein as defined in the applicable governing document. This summary is qualified in its entirety by reference to the full text of each of the Cheniere Certificate of Incorporation, the Cheniere Bylaws, the Cheniere corporate governance guidelines, the CQH LLC Agreement and the CQH corporate governance guidelines. For information on how to obtain a copy of these documents, please read the section titled “Where You Can Find More Information” beginning on page 92.

 

Cheniere Stockholders		CQH Shareholders
PURPOSE AND TERM OF EXISTENCE
Cheniere’s stated purpose is to engage in, promote and carry on any lawful act or activity for which companies may be organized under the DGCL.		CQH’s stated purpose is to act as a limited partner of Cheniere Partners and to own, acquire, transfer, exercise control over and otherwise dispose of Cheniere Partners Units.
CAPITALIZATION
As of August 15, 2018, Cheniere had 260,729,982 shares of Cheniere Common Stock issued and 248,166,804 shares of Cheniere Common Stock outstanding.   Cheniere has the authority to issue 485,000,000 shares, consisting of:   •  480,000,000 shares of Cheniere Common Stock, having a par value of $.003 per share; and   •  5,000,000 shares of preferred stock, having a par value of $.0001 per share.		As of August 15, 2018, CQH had 231,700,000 CQH Common Shares issued and outstanding, of which 212,953,991 CQH Common Shares were owned by Cheniere and its affiliates, 18,746,009 CQH Common Shares were owned by the public and one CQH Voting Share was owned by Cheniere.   CQH is authorized to issue an unlimited number of CQH Common Shares. Additional classes or series of securities may be created with the approval of the CQH Board, provided that any such additional class

 

68

Cheniere Stockholders		CQH Shareholders
		or series must be approved by a vote of holders of a majority of outstanding CQH shares. Generally, CQH may create, authorize or issue an unlimited number of additional CQH Securities other than the CQH Voting Share or any class or series thereof and derivative shares under employee benefit plans for any CQH purpose at any time.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Cheniere Certificate of Incorporation and Cheniere Bylaws provide that the Cheniere Board has the authority to declare dividends and fix a record date for such dividends.		Within 10 business days following the receipt by CQH of any dividend from Cheniere Partners in respect of the Cheniere Partners Units held by CQH, an amount equal to 100% of such dividend, net of reserves as determined by the CQH Board for income taxes payable by CQH, for its expenses and amounts due under the Services Agreement, for the service and reduction of indebtedness incurred and for its purposes, will be divided by CQH pro rata to CQH Shareholders and the holder of the CQH Voting Share (the “CQH Voting Shareholder”), with the CQH Voting Shareholder participating pari passu with the common shareholders as if the CQH Voting Share were a single CQH Common Share, as of the record date (as defined in the CQH LLC Agreement) selected by the CQH Board.   All dividends required to be made under the CQH LLC Agreement will be made subject to Sections 18-607 and 18-804 of the DLLCA. Record Holders (as defined in the CQH LLC Agreement) will not be entitled to any dividend to be paid to CQH by Cheniere Partners until such time as CQH has received such dividend from Cheniere Partners, the establishment of a record date by CQH notwithstanding.
APPRAISAL RIGHTS
Under the DGCL, stockholders who properly demand and perfect appraisal rights in connection with a merger or consolidation of the corporation (including by not voting in favor of the adoption of the merger agreement and continuing to hold their shares through the effective time of the merger) have the right to receive payment of the fair value of their stock in cash as appraised by the Delaware Court of Chancery. Subject to certain exceptions, the DGCL provides that appraisal rights are not available to any class of stock listed on a national securities exchange or held of record by over 2,000 stockholders, unless, in either case, such stockholders are required in the merger to accept in exchange for their shares anything other than (1) shares of the surviving corporation, (2) shares of stock of another		CQH Shareholders are not entitled to dissenters’ rights of appraisal in the event of a merger or consolidation, a sale of all or substantially all of the assets of CQH or any other transaction or event pursuant to Section 12.1 of the CQH LLC Agreement.

 

69

Cheniere Stockholders		CQH Shareholders
corporation which is listed on a national securities exchange or held of record by more than 2,000 holders, (3) cash in lieu of fractional shares of such corporations or (4) any combination of the above.   Neither the Cheniere Certificate of Incorporation nor the Cheniere Bylaws contains appraisal rights provisions.
LIMITED CALL RIGHT
Not applicable.		If at any time prior to the occurrence of any event or series of related events that result in Cheniere ceasing to own greater than 25% of the outstanding CQH Common Shares or otherwise ceasing to own greater than 25% of the outstanding CQH Voting Shares (a “Cheniere Separation Event”), Cheniere or any of its affiliates holds 90% or more of the total ownership interests of any class then outstanding (other than the CQH Voting Share), Cheniere or such affiliate will then have the right, which right it may assign and transfer in whole or in part to CQH or any of its affiliates, exercisable at its option, to purchase all of such ownership interests of such class then outstanding held by other holders, at the greater of:   •  the current market price as of the date three days prior to the date that a notice regarding the election to exercise the limited call right is mailed; and   •  the highest cash price paid by such person or any of its affiliates for any such interest of such class purchased during the 90-day period preceding the date that such notice is mailed.   Upon the exercise by any person of the limit call right, no member will be entitled to dissenters’ rights of appraisal.
AMENDMENT OF GOVERNING DOCUMENTS
The Cheniere Certificate of Incorporation provides that the Cheniere Board will have the power to adopt, amend or repeal the Bylaws at any meeting at which a quorum is present by the affirmative vote of a majority of the whole Cheniere Board.   The Cheniere Certificate of Incorporation provides that the affirmative vote of 66 2/3% of the outstanding stock of Cheniere entitled to vote, voting together as a single class, is required for altering, amending, rescinding or repealing certain articles of the Cheniere Certificate of Incorporation relating to (i) the election and term of the Cheniere Board, (ii) the requirements to amend the Cheniere Certificate of Incorporation or Cheniere		General Amendments. Amendments to the CQH LLC Agreement may be proposed only by or with the consent of the CQH Board.   Except for the amendments requiring shareholder approval and the amendments to be adopted solely by the CQH Board, the CQH Board may amend any of the terms of the CQH LLC Agreement in compliance with the terms, conditions and procedures set forth in the CQH LLC Agreement.   Amendments Requiring Shareholder Approval. Generally, the affirmative vote of a majority of the outstanding CQH Common Shares will be required to

 

70

Cheniere Stockholders		CQH Shareholders
Bylaws, (iii) the requirements to call a special meeting or (iv) shareholder approval rights and voting requirements, in addition to any other vote that may be required by applicable law, the Cheniere Certificate of Incorporation or Cheniere Bylaws.   For more information regarding amendments of the governing documents, please read the discussion under “Voting Rights” below.		adopt any amendment or provision that (i) has a material adverse effect on the preferences or rights associated with the CQH Common Shares, (ii) reduces the time for any notice to which the CQH Shareholders may be entitled, (iii) enlarges the obligations of CQH Shareholders, (iv) alters the circumstances under which CQH could be dissolved or wound up, (v) changes the term of existence of CQH, (vi) alters, amends, repeals or is inconsistent with certain sections of the CQH LLC Agreement or (vii) alters, amends, repeals or is inconsistent with certain articles of the CQH LLC Agreement.   Amendment Requirements. No provision of the CQH LLC Agreement that establishes a percentage of outstanding CQH shares required to take any action will be amended, altered, changed, repealed or rescinded in any respect that would have the effect of reducing such voting percentage unless such amendment is approved by the affirmative vote of holders of outstanding CQH shares whose aggregate outstanding CQH shares constitute not less than the voting requirement sought to be reduced.
MANAGEMENT
The Cheniere Certificate of Incorporation provides that, generally, the business and affairs of Cheniere will be managed by or under the direction of the Cheniere Board.		Generally, the business and affairs of CQH will be managed by or under the direction of the CQH Board.
QUALIFICATION AND NUMBER OF DIRECTORS
Neither the Cheniere Certificate of Incorporation nor Cheniere Bylaws provide for a minimum or maximum number of directors. The exact number of directors is fixed exclusively by resolution adopted by a majority of the Cheniere Board. Pursuant to the Standstill Agreement with the Icahn Group, Cheniere has agreed not to expand the Cheniere Board to more than 11 members. Please read the section titled “Standstill Agreement” beginning on page 67.   Neither the Cheniere Certificate of Incorporation nor the Cheniere Bylaws provide for an age limitation on directors.		The CQH LLC Agreement provides that there initially will be five directors. However, a majority of the CQH Board may increase or decrease the number of directors, provided that there will be a minimum of three directors.   Since CQH is a “controlled company” as defined by the NYSE American listing standards, it is not required to have a board consisting of a majority of independent directors.   The CQH LLC Agreement does not provide an age limitation on directors.
STOCKHOLDER OR MEMBER CONSENT TO ACTION WITHOUT MEETING
The Cheniere Certificate of Incorporation provides that any action required to be taken or which may be taken by the Cheniere Stockholders must be effected at a duly called annual or special meeting of such holders and may not be taken by written consent in lieu of a meeting.		Any action permitted or required to be taken at a meeting may be taken by CQH Shareholders (holding at least the number of outstanding CQH shares as would otherwise be necessary to take any such action at a meeting at which all CQH Shareholders entitled to vote were present and voting) by written consent or by electronic transmission.

 

71