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Filed pursuant to Rule 424(b)(3)
Registration No. 333-226231

 

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.


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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 August 21, 2018, and is being first mailed to CQH Shareholders on or about August 21, 2018.

 

On behalf of the CQH Board,
Jack A. Fusco
Chairman of the Board of Directors of Cheniere Energy Partners LP Holdings, LLC


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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


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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.


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CONSENT SOLICITATION/PROSPECTUS

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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  

 

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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  

 

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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  

 

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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.

 

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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,

 

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  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.

 

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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.

 

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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

 

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SUMMARY

This summary highlights selected information included in this document and does not contain all of the information that may be important to you. To fully understand the Merger Agreement and the transactions contemplated thereby, including the Merger, and for a more complete description of the terms of the Merger Agreement, you should read carefully this entire consent solicitation/prospectus, including the annexes, as well as the documents incorporated by reference into this consent solicitation/prospectus, and the other documents to which you are referred. In addition, Cheniere and CQH incorporate by reference important business and financial information about Cheniere and CQH into this document, as further described in the section titled “Where You Can Find More Information” beginning on page 92. You may obtain the information incorporated by reference into this document without charge by following the instructions in the section titled “Where You Can Find More Information” beginning on page 92. Each item in this summary includes a page reference directing you to a more complete description of that item.

Information About the Companies (page 27)

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 liquefied natural gas (“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 Energy Partners, L.P. (“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 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.

Cheniere’s 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’ common units and subordinated units, representing limited partner interests (collectively, the “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.



 

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

Written Consents of CQH Shareholders (page 26)

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. For further discussion, please read the section titled “Written Consents of CQH Shareholders” beginning on page 26.

The Merger and the Merger Agreement (pages 28 and 50)

The terms and conditions of the Merger are contained in the Merger Agreement, which is attached to this document as Annex A and is incorporated by reference herein in its entirety. You are encouraged to read the Merger Agreement carefully, as it is the legal document that governs the Merger.

The CQH Conflicts Committee and CQH Board have unanimously approved the Merger Agreement. The Merger Agreement provides for the acquisition of CQH by Cheniere through the merger of CQH with and into Merger Sub, a wholly owned subsidiary of Cheniere, with Merger Sub continuing as the surviving limited liability company of the Merger. Each CQH Shareholder will be entitled to receive 0.4750 shares of Cheniere Common Stock in exchange for each CQH Common Share that such holder owns immediately prior to the Effective Time of the Merger.

Recommendation of the CQH Board (page 35)

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. For a further discussion of the recommendation of the CQH Board, please read the section titled “The Merger—Recommendation of the CQH Board” beginning on page 35.



 

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Reasons for Approval by the CQH Conflicts Committee (page 35)

The CQH Conflicts Committee conducted a review and evaluation of the Merger and negotiations with Cheniere and its representatives on behalf of CQH and the Unaffiliated CQH Shareholders 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. For a further discussion of the recommendation of the CQH Board, please read the section titled “The Merger—Reasons for Approval by the CQH Conflicts Committee” beginning on page 35.

Opinion of Jefferies, Financial Advisor to the CQH Conflicts Committee (page 39)

In June 2018, the CQH Conflicts Committee retained Jefferies LLC (“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. 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 Jefferies’ opinion is attached hereto as Annex B. For a description of the opinion that the CQH Conflicts Committee received from Jefferies and further discussion, please read the section titled “The Merger—Opinion of Jefferies, Financial Advisor to the CQH Conflicts Committee” beginning on page 39.

Regulatory Matters (page 47)

In connection with the Merger, Cheniere intends to make all required filings under the Securities Act of 1933, as amended (“Securities Act”) and the Securities Exchange Act of 1934, as amended (“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 Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), and therefore no filings with respect to the Merger are required with the United States Federal Trade Commission (“FTC”) or the United States Department of Justice Antitrust Division (the “DOJ”).



 

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Security Ownership of Certain Beneficial Owners and Management/Directors of CQH (page 64)

Cheniere holds a controlling ownership interest in CQH. Cheniere controls CQH through Cheniere’s beneficial ownership, as of August 15, 2018, of 212,953,991 CQH Common Shares, representing approximately 91.9% of the outstanding CQH Common Shares, and the sole voting share of CQH representing a limited liability company interest in CQH and that is entitled to vote in the election of CQH’s directors (the “CQH Voting Share”). For a description of security ownership of directors and executive officers of CQH and further discussion, please read the section titled “Security Ownership of Certain Beneficial Owners and Management/Directors of CQH” beginning on page 64.

Conditions (page 60)

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 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) and CQH’s obligation to close is conditioned upon receipt of a written opinion of Sullivan & Cromwell to the effect that the Merger will be treated as a reorganization qualifying under Section 368(a) of the Code. In addition, the Closing of the Merger cannot occur on or prior to the record date for the Second Quarter Distribution.

Termination (page 62)

Cheniere and CQH may terminate the Merger Agreement and abandon the Merger at any time prior to the Effective Time of the Merger by mutual written consent of Cheniere and CQH.

The Merger Agreement may be terminated and the Merger abandoned by either Cheniere or CQH if:

 

   

The Merger has not been consummated by December 18, 2018 (the “Termination Date”); or

 

   

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

The Merger Agreement may be terminated and the Merger abandoned by Cheniere prior to the Effective Time if CQH breaches or fails to perform 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 the obligations of Cheniere and Merger Sub to close 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.

The Merger Agreement may be terminated and the Merger abandoned by CQH prior to the Effective Time if Cheniere breaches or fails to perform any representation, warranty, covenant or agreement made by Cheniere or Merger Sub 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 the obligation of CQH to close 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.

For further discussion, please read the section titled “The Merger Agreement—Termination” beginning on page 62.



 

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Interests of Directors and Executive Officers of CQH in the Merger (page 47)

CQH does not have any employees and relies on Cheniere to manage the conduct of CQH’s business through the services agreement dated as of December 18, 2013 (the “Services Agreement”). None of the individuals who have served as a director or executive officer at CQH or Cheniere since the beginning of 2017 have 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.

CQH’s directors and executive officers may have other interests in the Merger that may 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 upon the terms set forth in 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.

Comparison of Rights of Cheniere Stockholders and CQH Shareholders (page 68)

The rights of CQH Shareholders who receive shares of Cheniere Common Stock in the Merger will be governed by the certificate of incorporation of Cheniere (as may be amended from time to time, the “Cheniere Certificate of Incorporation”) and the bylaws of Cheniere (as may be amended from time to time, the “Cheniere Bylaws”). As a result, the CQH Shareholders will have different rights once they become Cheniere Stockholders due to the differences between the Cheniere Certificate of Incorporation and Cheniere Bylaws, on the one hand, and the CQH LLC Agreement, on the other. The key differences are described in the section titled “Comparison of Rights of Cheniere Stockholders and CQH Shareholders” beginning on page 68. For a description of Cheniere Common Stock, please read the section titled “Description of Cheniere Common Stock” beginning on page 65.

Comparison of Cheniere and CQH Market Prices and Implied Value of CQH Common Shares (page 82)

Cheniere Common Stock is quoted on the NYSE American under the symbol “LNG.” CQH Common Shares are quoted on the NYSE American under the symbol “CQH.”



 

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The following table sets forth the closing sale price per share of Cheniere Common Stock and CQH Common Shares as reported on the NYSE American on June 18, 2018, the last trading day prior to the public announcement of the Merger, and on August 16, 2018, the last practicable trading day before the filing of this consent solicitation/prospectus with the SEC. The table also shows the estimated implied value of each CQH Common Share as of the same two dates. This implied value was calculated by multiplying the closing price of a share of Cheniere Common Stock on the relevant date by the Exchange Ratio of 0.4750.

 

     Cheniere
Common
Stock
     CQH
Common
Shares
     Implied
Value

of CQH
Common
Shares
 

June 18, 2018

   $ 65.12      $ 30.28      $ 30.93  

August 16, 2018

   $ 61.23      $ 29.64      $ 29.08  

Because the Exchange Ratio is fixed and will not be adjusted for changes in the market price of either Cheniere Common Stock or CQH Common Shares, the market value of the shares of Cheniere Common Stock that CQH Shareholders will have the right to receive at the Effective Time may vary significantly from the market value of the Cheniere Common Stock that CQH Shareholders would receive if the Merger was completed on the date of this consent solicitation/prospectus. As a result, you should obtain recent market prices of Cheniere Common Stock and CQH Common Shares prior to delivering a written consent with respect to the approval of the Merger Agreement and the Merger. Please read the section titled “Risk Factors—Risks Related to the Merger” beginning on page 18.

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.

Material U.S. Federal Income Tax Consequences (page 84)

It is a condition to the completion of the Merger that CQH obtain an opinion of 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 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.

No Dissenters’ or Appraisal Rights (page 89)

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.

Summary of Risk Factors (page 18)

You should consider carefully all the risk factors together with all of the other information included in this consent solicitation/prospectus before deciding whether to deliver your written consent. Some of these risks



 

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include, but are not limited to, those described below and in more detail under the headings “Risk Factors—Risks Related to the Merger” and “Risk Factors—Risks Related to Cheniere Common Stock”:

 

   

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.

 

   

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

 

   

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.

 

   

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 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.

 

   

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 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.

 

   

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.

 

   

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.

 

   

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

 

   

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

 

   

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.

 

   

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.

 

   

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.



 

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

In addition, both Cheniere and CQH are subject to various risks associated with their respective businesses. Please carefully read this consent solicitation/prospectus, the documents incorporated herein by reference and the documents to which you are referred. Please read the section titled “Risk Factors” beginning on page 18.



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CHENIERE

The following table sets forth the selected historical consolidated financial data of Cheniere as of and for the periods indicated. The selected historical consolidated financial data as of and for the years ended December 31, 2017, 2016, 2015, 2014 and 2013 was derived from Cheniere’s audited consolidated financial statements of Cheniere included in its annual reports on Form 10-K. The selected historical consolidated financial data as of June 30, 2018 and for the six months ended June 30, 2018 and 2017 was derived from the unaudited consolidated interim financial statements of Cheniere included in its quarterly reports on Form 10-Q. You should read the selected financial data set forth below in conjunction with Cheniere’s financial statements and the related notes.

 

     For the six
months ended
June 30,
    For the year ended December 31,  
     2018     2017     2017     2016     2015     2014     2013  
     (in millions, except per share data)  
     (unaudited)        

Consolidated Statement of Operations Data:

              

Total revenues

   $ 3,785     $ 2,452     $ 5,601     $ 1,283     $ 271     $ 268     $ 267  

Total operating costs and expenses

     2,702       1,802       4,213       1,313       720       540       595  

Income (loss) from operations

     1,803       650       1,388       (30     (449     (272     (328

Interest expense, net of capitalized interest

     (432     (353     (747     (488     (322     (181     (178

Net income (loss)

     750       193       563       (665     (1,097     (692     (559

Net income (loss) attributable to non-controlling interest

     411       424       956       (55     (122     (144     (51

Net income (loss) attributable to common stockholders

     339       (231     (393     (610     (975     (548     (508

Net income (loss) per share attributable to common stockholders—basic

   $ 1.42     $ (0.99   $ (1.68   $ (2.67   $ (4.30   $ (2.44   $ (2.32

Net income (loss) per share attributable to common stockholders—diluted

   $ 1.40     $ (0.99   $ (1.68   $ (2.67   $ (4.30   $ (2.44   $ (2.32

 

     As of 
June 30,
    As of December 31,  
     2018     2017     2016     2015     2014     2013  
     (in millions)  
     (unaudited)        

Consolidated Balance Sheet Data:

            

Total assets

   $ 30,327     $ 27,906     $ 23,703     $ 18,809     $ 12,433     $ 9,571  

Current liabilities

     1,728       1,251       1,077       2,185       232       237  

Noncurrent liabilities

     26,865       25,415       21,787       15,063       9,699       6,494  

Stockholders’ equity:

            

Preferred stock

     —         —         —         —         —         —    

Common stock

     1       1       1       1       1       1  

Treasury stock

     (394     (386     (374     (354     (293     (180

Additional paid-in capital

     3,664       3,248       3,211       3,075       2,777       2,460  

Accumulated deficit

     (4,288     (4,627     (4,234     (3,624     (2,649     (2,101
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity (deficit)

     (1,017     (1,764     (1,396     (902     (164     180  

Non-controlling interest

     2,751       3,004       2,235       2,463       2,666       2,660  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     1,734       1,240       839       1,561       2,502       2,840  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

     30,327       27,906       23,703       18,809       12,433       9,571  


 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CQH

The following table sets forth the selected historical consolidated financial data of CQH as of and for the periods indicated. The selected historical consolidated financial data as of and for the years ended December 31, 2017, 2016, 2015, and 2014 and the period from July 29, 2013 (date of inception) through December 31, 2013 was derived from CQH’s audited consolidated financial statements of CQH included in its annual reports on Form 10-K. The selected historical consolidated financial data as of June 30, 2018 and for the six months ended June 30, 2018 and 2017 was derived from the unaudited consolidated interim financial statements of CQH included in its quarterly reports on Form 10-Q. You should read the selected financial data set forth below in conjunction with CQH’s financial statements and the related notes.

 

    For the six
months ended
June 30,
    For the year ended
December 31,
    Period from
July 29, 2013
(date of
inception)
through
December 31,
 
    2018     2017     2017     2016     2015     2014     2013  
    (in thousands, except per share data)  
    (unaudited)        

Consolidated Statement of Operations Data:

             

Equity income from investment in Cheniere Partners

  $ 251,866     $ 10,169     $ 120,797     $ 20,338     $ 20,338     $ 20,338     $ —    

Net income (loss)

    247,800       8,951       118,461       17,798       18,173       18,141       (54

Net income per share attributable to common stockholders—basic and diluted

  $ 1.07     $ 0.04     $ 0.51     $ 0.08     $ 0.08     $ 0.08       —    

Cash dividends declared per common share

  $ 1.070     $ 0.040     $ 0.510     $ 0.080     $ 0.079     $ 0.074       —    

 

     As of
June 30,
     As of December 31,  
     2018      2017      2016      2015      2014      2013  
     (in thousands)  
     (unaudited)         

Consolidated Balance Sheet Data:

                 

Total assets

   $ 879      $ 714      $ 423      $ 1,195      $ 1,553      $ 353  


 

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SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

The following selected unaudited pro forma consolidated financial information is derived from the unaudited pro forma consolidated statements of operations of Cheniere for the six months ended June 30, 2018 and the year ended December 31, 2017, which have been prepared to give effect to the acquisition of all publicly-held shares of CQH not already owned by Cheniere, as if the acquisition of such shares was completed on January 1, 2017, and the unaudited pro forma consolidated balance sheet of Cheniere at June 30, 2018, which has been prepared to give effect to the acquisition on June 30, 2018. The following selected unaudited pro forma consolidated financial information is for illustrative and informational purposes only and is not necessarily indicative of the results that might have occurred had the acquisition taken place on January 1, 2017, for statements of operations purposes, and June 30, 2018, for balance sheet purposes, and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section titled “Risk Factors” beginning on page 18 of this consent solicitation/prospectus. The following selected unaudited pro forma consolidated financial information should be read in conjunction with the section titled “Unaudited Pro Forma Consolidated Financial Statements” and related notes beginning on page F-1 of this consent solicitation/prospectus.

Selected Unaudited Pro Forma Consolidated Statements of Operations Information:

 

     Six Months Ended
June 30, 2018
    Year Ended
December 31, 2017
 
     (in millions)  

Total revenues

   $ 3,785     $ 5,601  

Total operating costs and expenses

     2,702       4,213  

Income from operations

     1,083       1,388  

Interest expense, net of capitalized interest

     (432     (747

Net income

     750       563  

Net income attributable to non-controlling interest

     359       912  

Net income (loss) attributable to common stockholders

     391       (349

Selected Unaudited Pro Forma Consolidated Balance Sheet Information:

 

     June 30,
2018
 
     (in millions)  

Total assets

   $ 30,327  

Current liabilities

     1,734  

Noncurrent liabilities

     26,865  

Stockholders’ equity

  

Preferred stock

     —    

Common stock

     1  

Treasury stock

     (394

Additional paid-in capital

     3,984  

Accumulated deficit

     (4,288
  

 

 

 

Total stockholders’ deficit

     (697

Non-controlling interest

     2,425  
  

 

 

 

Total equity

     1,728  
  

 

 

 

Total liabilities and equity

     30,327  


 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA

PER SHARE INFORMATION

The following table summarizes unaudited per share data for (i) Cheniere and CQH on a historical basis, (ii) Cheniere on a pro forma consolidated basis giving effect to the acquisition of all publicly-held shares of CQH owned by Cheniere and (iii) CQH on a pro forma equivalent basis calculated by multiplying the pro forma consolidated—Cheniere per common share amounts by the Exchange Ratio of 0.4750. It has been assumed for purposes of the pro forma consolidated financial information provided below that the acquisition was completed on January 1, 2017, for earnings per share purposes, and on June 30, 2018, for book value per share purposes. The following information should be read in conjunction with the section titled “Unaudited Pro Forma Consolidated Financial Statements” and related notes included in this document beginning on page F-1 of this consent solicitation/prospectus.

 

     Six Months Ended
June 30, 2018
     Year Ended
December 31, 2017
 

Cheniere Historical Data

     

Net income (loss) per common share—basic

   $ 1.42      $ (1.68

Net income (loss) per common share—diluted

   $ 1.40      $ (1.68

Book value per common share as of period end (1)

   $ 6.99      $ 5.22  

CQH Historical Data

     

Net income per common share—basic and diluted

   $ 1.07      $ 0.51  

Cash dividends declared per common share

   $ 1.070      $ 0.510  

Book value per common share as of period end (1)

   $ —          —    

Pro forma consolidated—Cheniere

     

Net income (loss) per common share—basic

   $ 1.53      $ (1.38

Net income (loss) per common share—diluted

   $ 1.52      $ (1.38

Book value per common share as of period end (1)

   $ 6.78        N/A  

Pro forma equivalent—CQH (2)

     

Net income (loss) per common share—basic

   $ 0.73      $ (0.66

Net income (loss) per common share—diluted

   $ 0.72      $ (0.66

Book value per common share as of period end

   $ 3.22        N/A  

 

(1)

Historical book value per common share for Cheniere and CQH represents total equity at period end divided by the number of shares of Cheniere Common Stock and CQH Common Shares outstanding as of period end. The pro forma consolidated book value per common share for Cheniere represents total pro forma total equity at period end divided by the pro forma number of common shares of Cheniere that would have been outstanding as of June 30, 2018 had the acquisition been completed as of that date.

(2)

Pro forma equivalent amounts have been calculated by multiplying the pro forma consolidated—Cheniere per common share amounts by the Exchange Ratio of 0.4750. No exchange ratio adjustment has been made to reflect Cheniere’s acquisition of 21,453,482 common shares of CQH in a series of privately negotiated transactions pursuant to share purchase and exchange agreements, in exchange for a total of 10,278,739 unregistered shares of Cheniere, in April and May 2018.



 

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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.

 

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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

 

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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);

 

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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

 

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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

 

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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

 

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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.

 

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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.

 

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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.

 

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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.

 

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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.

 

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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”).

 

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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.

 

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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

 

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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

 

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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

 

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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

 

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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

 

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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.

 

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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

 

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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

 

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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.

 

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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

 

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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;

 

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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

 

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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  

 

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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

 

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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.

 

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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.

 

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(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

 

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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

 

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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.

 

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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

 

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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

 

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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.

 

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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,

 

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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;

 

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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;

 

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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.

 

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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

 

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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,

 

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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.

 

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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

 

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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.

 

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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

 

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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.

 

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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.

 

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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

 

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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

 

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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.

 

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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

 

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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.

 

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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

 

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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.

 

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Cheniere Stockholders

  

CQH Shareholders

TIME AND PLACE OF MEETINGS OF STOCKHOLDERS OR MEMBERS

The Cheniere Bylaws provide that meetings of Cheniere stockholders for the election of directors or for any other purpose will be held at such time and place, either within or without the State of Delaware designated by the Cheniere Board.    The CQH Board will designate the place of meeting for any annual meeting or for any special meeting of CQH Shareholders. If no designation is made, the place of meeting will be the principal office of CQH.

MEETINGS OF STOCKHOLDERS OR MEMBERS

The Cheniere Bylaws provide that the annual meeting of Cheniere Stockholders for the election of directors and for the transaction of such other business as may properly come before such meeting will be held on such date and at such time as will be fixed by resolution of the Cheniere Board. The Cheniere Board may postpone, reschedule or cancel any annual meeting of Cheniere Stockholders previously scheduled.    A failure to hold an annual meeting of CQH Shareholders at the time designated by the CQH Board will not affect otherwise valid acts of CQH or work a forfeiture or dissolution of CQH. If an annual meeting is not held on the date designated, the CQH Board will cause the meeting to be held as soon as is convenient.

STOCKHOLDER RIGHT TO CALL A SPECIAL MEETING

The Cheniere Bylaws provide that a special meeting may not be called by the Cheniere Stockholders. However, the Cheniere Bylaws do provide that a special meeting will be called by the Cheniere Board upon a written request, which complies with the Cheniere Bylaws, that is made by holders of at least 50.1% of the outstanding shares of Cheniere Common Stock.

 

Special meetings of the Cheniere Stockholders may be called only by the Chairman of the Cheniere Board, Chief Executive Officer or the President, by the Cheniere Board, or by the Corporate Secretary at the request in writing of a majority of the Cheniere Board.

   Special meetings of CQH Shareholders may be called only by a majority of the CQH Board or by holders of a majority of the outstanding CQH Common Shares.

NOTICE OF MEETINGS

The Cheniere Bylaws provide that whenever Cheniere Stockholders are required or permitted to take action at a meeting, a written notice of the meeting of Cheniere Stockholders will be given stating:

 

•  the place, date and time of such meeting;

 

•  the means of remote communications by which Cheniere Stockholders and proxy holders may be deemed to be present in person and vote at such meeting;

 

•  the record date for determining stockholders entitled to vote at the meeting or any adjournment thereof (if such record date is different from the record date for determining the Cheniere Stockholders entitled to notice of the meeting); and

  

Notice is required to state the place, day and hour of any annual meeting or special meeting of CQH Shareholders and to comply with the following requirements:

 

•  in the case of a special meeting of CQH Shareholders, the purpose or purposes for which the meeting is called; or

 

•  in the case of an annual meeting, those matters that the CQH Board intends to present for action by CQH Shareholders.

 

The notice of any meeting will be delivered by CQH not less than 10 calendar days or more than 60 calendar days before the date of the meeting.

 

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•  in the case of a special meeting, the purpose or purposes for which such meeting is to be held.

 

The notice of any meeting will be given not less than 10 nor more than 60 days before the date of such meeting.

  

ADJOURNMENT OF STOCKHOLDER MEETINGS

The Cheniere Bylaws provide that any Cheniere Stockholders’ meeting, annual or special, whether or not a quorum is present, may be adjourned to reconvene at the same or some other place and notice need not be given of the adjourned meeting if the date, time and place thereof are announced at the meeting at which the adjournment is taken. If the adjournment is for more than 30 days or if after the adjournment a new record date for determining Cheniere Stockholders entitled to vote is fixed for the adjourned meeting, a notice of the adjourned meeting will be given to each Cheniere Stockholder entitled to vote thereat.    When a meeting of CQH Shareholders is adjourned to another time or place, notice need not be given of the adjourned meeting and a new record date need not be fixed, if the time and place thereof are announced at the meeting at which the adjournment is taken, unless such adjournment will be for more than 30 days. If the adjournment is for more than 30 days or if a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting will be given.

QUORUM

The Cheniere Bylaws provide that, generally, at each meeting of Cheniere Stockholders, the holders of a majority in voting power of the outstanding shares of Cheniere Common Stock entitled to vote, present in person or by proxy, will constitute a quorum for the transaction of business at the meetings. Abstentions and broker non-votes will be deemed to be shares present for quorum purposes.

 

The Cheniere Bylaws provide that if a quorum will not be present in person or by proxy at any meeting of Cheniere Stockholders, the Cheniere Stockholders entitled to vote, present in person or by proxy, may, by a majority in voting power thereof, adjourn the meeting until a quorum will be present.

   At any meeting of CQH Shareholders, the holders of a majority of the outstanding CQH shares of the class or series or classes or series for which a meeting has been called represented in person or by proxy will constitute a quorum of such class or series or classes or series unless any such action by CQH Shareholders requires approval by holders of a greater percentage of outstanding CQH shares, in which case the quorum will be such greater percentage.

PROXY

The Cheniere Bylaws provide that each Cheniere Stockholder having the right to vote is entitled to vote in person or by proxy bearing a date not more than three years prior to voting, unless such proxy provides for a longer period.    At any meeting of CQH Shareholders, every holder of an outstanding CQH share may vote in person or by proxy. If authorized by the CQH Board, CQH Shareholders and proxyholders not physically present at a meeting of members of CQH may by means of remote communication participate in such meeting and be deemed present in person and vote at such meeting.

DIRECTOR NOMINATIONS; PROPOSALS OF STOCKHOLDERS AT MEETINGS

The Cheniere Bylaws provide the following:

 

Annual Meetings. Nominations for election to the Cheniere Board and the proposal of other business to be

   Prior to the occurrence of a Cheniere Separation Event, proposals of business to be considered by CQH Shareholders at a meeting of CQH Shareholders may only be made by or at the direction of the CQH Board.

 

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considered by the Cheniere Stockholders may be made at an annual meeting of Cheniere Stockholders only:

 

•  pursuant to Cheniere’s notice of meeting (or any supplement thereto);

 

•  by or at the direction of the Cheniere Board or any duly authorized committee;

 

•  by any Cheniere Stockholder who was a stockholder of record of Cheniere at the time the notice is delivered to the Corporate Secretary, who is entitled to vote at the meeting and upon such election proposed business and who complies with the notice procedures; or

 

•  by any Eligible Stockholder (as defined in Section 2.15(C) of the Cheniere Bylaws) who complies with the requirements and procedures and whose nominee satisfies the requirements.

 

Special Meetings. Only such business will be conducted at a special meeting of Cheniere Stockholders as will have been brought before the meeting pursuant to Cheniere’s notice of meeting. Nominations for election to the Cheniere Board may be made at a special meeting of Cheniere Stockholders at which directors are to be elected pursuant to Cheniere’s notice of meeting:

 

•  by or at the direction of the Cheniere Board or any duly authorized committee thereof; or

 

•  provided that the Cheniere Board has determined that directors will be elected at such meeting, by any Cheniere Stockholder who is a Cheniere Stockholder of record at the time the notice is delivered to the Corporate Secretary, who is entitled to vote at the meeting and upon such election and who complies with the notice procedures.

 

Proxy Access for Director Nominations. Any Cheniere Stockholder or group of up to 20 Cheniere Stockholders may submit a nomination in accordance with proxy access for director nominations requirements only if the person or group (in the aggregate) has continuously owned at least 3% of the Cheniere Common Stock as of the date of the nomination for the three-year period preceding the nomination and continues to own at least 3% through the date of the annual meeting.

 

The maximum number of nominees nominated by all Cheniere Stockholders that will be included in Cheniere’s proxy materials for an annual meeting of

  

 

Annual Meetings. Generally, on or after the occurrence of a Cheniere Separation Event, nominations of Persons for election to the CQH Board and the proposal of business to be considered by CQH Shareholders may be made at an annual meeting of CQH Shareholders subject to certain notification requirements set forth in the CQH LLC Agreement:

 

•  pursuant to CQH’s notice of meeting,

 

•  by or at the direction of the CQH Board,

 

•  for nominations to the CQH Board only, by any holder of outstanding CQH Common Shares who is entitled to vote at the meeting, who complied with notice procedures and who was a Record Holder (as defined in the CQH LLC Agreement) of a sufficient number of outstanding CQH Common Shares as of the record date for such meeting to elect one or more CQH Shareholders to the CQH Board assuming that such holder cast all of the votes it is entitled to cast in such election in favor of a single candidate and such candidate received no other votes from any other holder of outstanding CQH Common Shares, or

 

•  by any holder of outstanding CQH Common Shares who is entitled to vote at the meeting, who complied with the notice procedures and who is a Record Holder of outstanding CQH Common Shares at the time such notice is delivered to the Corporate Secretary of CQH.

 

Special Meetings. Only such business will be conducted at a special meeting of CQH Shareholders as will have been brought before the meeting pursuant to CQH’s notice of meeting. Generally, on or after the occurrence of a Cheniere Separation Event, nominations of persons for election to the CQH Board may be made at a special meeting of CQH Shareholders at which directors are to be elected pursuant to CQH’s notice of meeting:

 

•  by or at the direction of the CQH Board,

 

•  by any holder of outstanding CQH Common Shares who is entitled to vote at the meeting, who complied with the notice procedures and who was a Record Holder of a sufficient number of outstanding CQH Common Shares as of the record date for such meeting to elect one or more members to the CQH Board assuming that

 

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Cheniere Stockholders will not exceed that number of directors constituting 20% of the total number of directors of Cheniere in office on the last day on which a Nomination Notice (as defined in Section 2.15(D) of the Cheniere Bylaws) may be submitted.

 

Proxy access for director nominations is not available in connection with a special meeting of Cheniere Stockholders.

  

such holder cast all of the votes it is entitled to cast in such election in favor of a single candidate and such candidate received no other votes from any other holder of outstanding CQH Common Shares, or

 

•  by any holder of outstanding CQH Common Shares who is entitled to vote at the meeting, who complies with the notice procedures and who is a Record Holder of outstanding CQH Common Shares at the time such notice is delivered to the Corporate Secretary of CQH.

RECORD DATES FOR STOCKHOLDERS OR MEMBER MEETINGS

The Cheniere Bylaws provide that the Cheniere Board may fix a record date, which will not be less than 10 days or more than 60 days before the date of such meeting.

 

The record date will also be the date for determining the Cheniere Stockholders entitled to vote at such meeting unless the Cheniere Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting will be the date for making such determination.

   Generally, for purposes of determining CQH Shareholders entitled to notice of or to vote at a meeting of CQH Shareholders, the CQH Board may set a record date, which will not be less than 10 or more than 60 days before the date of the meeting.

VOTING RIGHTS

The Cheniere Bylaws provide that each Cheniere Stockholder entitled to vote at any meeting of Cheniere Stockholders will be entitled to one vote for each share of Cheniere Common Stock held by such stockholder which has voting power upon the matter in question.

 

All matters presented to the Cheniere Stockholders at a meeting at which a quorum is present for which no minimum or other vote is called for by the Cheniere Certificate of Incorporation, the Cheniere Bylaws, the rules or regulations of any stock exchange applicable to Cheniere, or applicable law or pursuant to any regulation applicable to Cheniere or its securities, other than for the election of directors, will be decided by the affirmative vote of the holders of a majority in voting power of the shares of Cheniere Common Stock entitled to vote on the matter, present in person or by proxy (with abstentions counting as votes against the matter and broker non-votes not counting as shares entitled to vote on the matter).

 

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

  

Each outstanding CQH Voting Share will be entitled to one vote per CQH Voting Share in the election of directors.

 

Each outstanding CQH Common Share will be entitled to one vote per CQH Common Share on all matters submitted to a vote of CQH Shareholders.

 

Generally, CQH Shareholders will have no voting rights whatsoever in the election of directors or on any matter not explicitly stated in the CQH LLC Agreement to require a vote of CQH Shareholders or members of CQH (even if a right to vote would otherwise be provided under the DLLCA).

 

All other matters submitted to CQH Shareholders for approval will be determined by a majority of the votes cast by the holders of outstanding CQH shares of the class or series or classes or series entitled to vote unless a greater percentage is required with respect to such matter under the DLLCA or other applicable law, under the rules of any national securities exchange on which the CQH Common Shares are listed for trading, or under the provisions of the CQH LLC Agreement.

 

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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 Bylaws or Cheniere Certificate of Incorporation, (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.

 

On any compensation-related matter presented to the Cheniere Stockholders on or before September 17, 2022 at a meeting at which a quorum is present, such compensation-related matter will be decided by the affirmative vote of the holders of a majority in voting power of the shares of Cheniere Common Stock entitled to vote on the matter, present in person or by proxy (with abstentions counting as votes against the matter and broker non-votes not counting as shares entitled to vote on the matter).

  

CONFLICTS OF INTEREST

The Cheniere Bylaws provide that no contract or transaction between Cheniere and one or more of its directors or officers, or between Cheniere and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers or have a financial interest, will be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Cheniere Board or committee which authorizes the contract or transaction, or solely because any such director’s or officer’s vote is counted for such purpose if:

 

•  the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Cheniere Board or the committee, and the Cheniere Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors are less than a quorum;

 

•  the material facts as to the director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Cheniere Stockholders entitled to vote and the contract or transaction is specifically approved in good faith by vote of the Cheniere Stockholders; or

  

The CQH LLC Agreement provides that if any actual or potential conflict of interest exists or arises, any resolution or course of action in respect of such conflict of interest will be permitted and deemed approved and will not constitute a breach of the CQH LLC Agreement or of any duty existing at law, in equity or otherwise, if the resolution or course of action in respect of such conflict of interest is:

 

•  approved by “Special Approval” (as defined below);

 

•  approved by the vote of a majority of the outstanding CQH Common Shares (excluding CQH Common Shares owned by the director, officer or affiliate of CQH);

 

•  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).

 

“Special Approval” means approval by a majority of the members of the Conflicts Committee acting in good faith. The Conflicts Committee is a committee

 

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•  the contract or transaction is fair as to Cheniere as of the time it is authorized, approved or ratified by the Cheniere Board, a committee thereof or the Cheniere Stockholders.

 

Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Cheniere Board or of a committee which authorizes the contract or transaction.

   of the CQH Board composed entirely of two or more independent directors.

ELECTION OF DIRECTORS

The Cheniere Bylaws provide that, subject to the rights of holders of any series of preferred stock to elect additional directors under specified circumstances, the directors will be elected annually at each annual meeting of Cheniere Stockholders to hold office for a term expiring at the next annual meeting of Cheniere Stockholders. Each director will serve until his successor is elected and qualified or until his death, retirement, resignation or removal.

 

Generally, each director will be elected by the vote of a majority of votes cast with respect to that director’s election at any meeting for the election of directors at which a quorum is present, provided that if, as of the tenth day preceding the date Cheniere first mails its notice of meeting for such meeting to the Cheniere Stockholders, the number of nominees exceeds the number of directors to be elected, the directors will be elected by the vote of a plurality of the votes cast.

  

Each director will serve until his or her successor has been duly elected and qualified or until such director dies, resigns or is removed. A director may resign at any time upon written notice to CQH.

 

Prior to the occurrence of a Cheniere Separation Event, the directors will be elected by the affirmative vote of the member of CQH holding the sole outstanding Voting Share. Each outstanding CQH Voting Share will be entitled to one vote per CQH Voting Share in the election of directors. CQH Shareholders will have no voting rights whatsoever in the election of directors.

 

On or after the occurrence of a Cheniere Separation Event, the directors will be elected by the affirmative vote of CQH Shareholders holding the lesser of (a) a majority of the outstanding CQH Common Shares and (b) 67% of the CQH Common Shares present at a meeting of CQH Shareholders at which there is a quorum.

VACANCIES ON BOARD OF DIRECTORS

The Cheniere Bylaws provide that, subject to applicable law and the rights of holders of any series of preferred stock to elect additional directors under specified circumstances, vacancies on the Cheniere Board, and newly created directorships resulting from any increase in the authorized number of directors, may be filled only by the affirmative vote of a majority of the directors then in office and not by Cheniere Stockholders. No decrease in the authorized number of directors constituting the Cheniere Board will shorten the term of any incumbent director.    Vacancies existing on the CQH Board may be filled only in accordance with election of director requirements under the CQH LLC Agreement. Any director chosen to fill a vacancy will hold office until his or her successor has been duly elected and qualified or until such director’s earlier death, resignation or removal.

REMOVAL OF DIRECTORS

The Cheniere Bylaws provide that, subject to the rights of the holders of any series of preferred stock then outstanding, any director, or the entire Cheniere Board, may be removed from office with or without cause.

 

Under the DGCL, any director may be removed, with or without cause, by the holders of a majority of the shares

  

Directors may only be removed from office:

 

•  with or without cause by the affirmative vote of the member of CQH holding the sole outstanding CQH Voting Share for so long as Cheniere holds the sole outstanding CQH Voting Share; or

 

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then entitled to vote at an election of directors, subject to certain exceptions.   

 

•  for cause by the affirmative vote of a majority of the remaining directors.

INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS; INSURANCE

The Cheniere Bylaws provide that, to the extent that a person has been successful on the merits or otherwise in defense of any proceeding, or in defense of any claim, issue or matter therein, such person will be indemnified against expenses (including attorneys’ fees) incurred by such person.

 

Cheniere will indemnify and hold harmless, to the fullest extent permitted by applicable law, any person (a “Covered Person”) who was or is made or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of Cheniere or, while a director or officer of Cheniere, is or was serving at the request of Cheniere as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Covered Person.

 

Cheniere will be required to indemnify a Covered Person in connection with a Proceeding commenced by such Covered Person only if commencement of such Proceeding by the Covered Person was authorized in the specific case by the Cheniere Board.

 

Generally, Cheniere will pay the expenses (including attorneys’ fees) incurred by a Covered Person in defending any proceeding in advance of its final disposition. However, such payment of expenses in advance of the final disposition of the proceeding will be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined that the Covered Person is not entitled to be indemnified.

 

Cheniere’s obligation, if any, to indemnify or to advance expenses to any Covered Person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity will be reduced by any amount such Covered Person may collect as indemnification or advancement of expenses from such

  

CQH will indemnify any director, officer, employee, partner, manager, fiduciary or trustee of CQH or any other person (each, an “Indemnitee”) who was or is a party or is threatened to be made a party to, or otherwise requires representation of counsel in connection with, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of CQH) by reason of the fact that such person is or was a director or officer of CQH, or, while serving as a director or officer of CQH, at the request of CQH, as a director, officer, employee, partner, manager, fiduciary or trustee of CQH or any other person or by reason of any action alleged to have been taken or omitted in such capacity, against losses, expenses (including attorneys’ fees), judgments, fines, damages, penalties, interest, liabilities and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding.

 

CQH will not indemnify such person if there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the Indemnitee acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was unlawful.

 

The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, will not, of itself, create a presumption that the person did not act in good faith, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that the person’s conduct was unlawful.

 

To the extent an Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding, or in the defense of any claim, issue or matter therein, such person will be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person.

 

Expenses (including attorneys’ fees) incurred by an Indemnitee in defending any action, suit or

 

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other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.

 

Insurance. Cheniere may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of Cheniere, or is or was serving at the request of Cheniere as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his or her status as such, whether or not Cheniere would have the power to indemnify him against such liability under the provisions of Section 145 of the DGCL.

  

proceeding will be paid by CQH in advance of the final disposition of such action, suit or proceeding and in advance of any determination that such Indemnitee is not entitled to be indemnified, upon receipt of an undertaking by or on behalf of such Indemnitee to repay such amount if it will ultimately be determined by final judicial decision from which there is no further right to appeal that such Person is not entitled to be indemnified by CQH.

 

CQH may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (whether or not an action by or in the right of CQH) by reason of the fact that the person is or was an employee (other than an officer) or agent of CQH, or, while serving as an employee (other than an officer) or agent of CQH is or was serving at the request of CQH as a director, officer, employee, partner, fiduciary, trustee or agent of another person to the extent:

 

•  permitted by the laws of the State of Delaware as from time to time in effect, and

 

•  authorized by the CQH Board. CQH may, to the extent permitted by Delaware law and authorized by the CQH Board, pay expenses (including attorneys’ fees) reasonably incurred by any such employee or agent in defending any civil, criminal, administrative or investigative action, suit or proceeding in advance of the final disposition of such action, suit or proceeding, upon such terms and conditions as the CQH Board may determine. The provisions of Section 7.6(l) of the CQH LLC Agreement will not constitute a contract right for any such employee or agent.

 

The CQH Board, acting alone and without the approval of any member of CQH, may amend the indemnification section of the CQH LLC Agreement.

 

Insurance. CQH may purchase and maintain insurance, on behalf of its directors and officers, and such other persons as the Cheniere Board will determine, against any liability that may be asserted against or expense that may be incurred by such person in connection with CQH’s activities or such person’s activities on behalf of CQH, regardless of whether CQH would have the power to indemnify

 

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   such person against such liability under the provisions of the CQH LLC Agreement.

LIMITATION ON DIRECTOR, OFFICER AND OTHERS LIABILITY

The Cheniere Certificate of Incorporation provides that personal liability of the directors of Cheniere is eliminated to the fullest extent permitted by the DGCL.   

To the fullest extent permitted by law, no director or officer will be liable to CQH, CQH Shareholders or any other person bound by the CQH LLC Agreement for monetary damages for losses sustained or liabilities incurred as a result of any act or omission of such director or officer, unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that, in respect of the matter in question, such person acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that such person’s conduct was criminal.

 

Except as expressly set forth in the CQH LLC Agreement or required by the DLLCA, neither the directors nor any other Indemnitee will have any duties (including fiduciary duties) or liabilities to CQH or to any member of CQH. The provisions of the CQH LLC Agreement, to the extent that they restrict or eliminate or otherwise modify the duties (including fiduciary duties) and liabilities of an Indemnitee otherwise existing at law or in equity, are agreed by CQH Shareholders to replace such other duties and liabilities of such Indemnitee, except to the extent inconsistent with applicable federal laws.

 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

Cheniere Market Price and Dividend Information

Shares of Cheniere Common Stock are listed on the NYSE American under the symbol “LNG.” The following table sets forth the high and low prices per share of Cheniere Common Stock for the periods indicated, rounded to the nearest whole cent. Cheniere’s fiscal year ends on December 31.

 

     High ($)      Low ($)  

2015:

     

Third Quarter

     71.11        46.23  

Fourth Quarter

     54.95        35.09  

2016:

     

First Quarter

     39.00        22.80  

Second Quarter

     39.75        31.02  

Third Quarter

     46.00        35.86  

Fourth Quarter

     44.45        35.07  

2017:

     

First Quarter

     50.53        41.46  

Second Quarter

     51.41        43.79  

Third Quarter

     49.59        40.36  

Fourth Quarter

     54.83        43.83  

2018:

     

First Quarter

     60.22        50.08  

Second Quarter

     69.50        52.37  

Third Quarter (through August 16, 2018)

     66.68        58.45  

You should obtain current market quotations for shares of Cheniere Common Stock, as the market price of Cheniere Common Stock will fluctuate between the date of this consent solicitation/prospectus and the date on which the Merger is completed, at times in between and thereafter. You can obtain these quotations from publicly available sources.

Cheniere has never paid a cash dividend on Cheniere Common Stock. Cheniere currently intends to retain earnings to finance the growth and development of Cheniere’s business and does not anticipate paying any cash dividends on the Cheniere Common Stock in the foreseeable future. Any future change in Cheniere’s dividend policy will be made at the discretion of the Cheniere Board in light of Cheniere’s financial condition, capital requirements, earnings, prospects and any restrictions under any financing agreements, as well as other factors the Cheniere Board deems relevant.

 

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CQH Market Price and Dividend Information

CQH Common Shares are listed on the NYSE American under the symbol “CQH.” The following table sets forth the high and low prices per CQH Common Share for the periods indicated and the regular dividends per CQH Common Share in the periods indicated, in each case rounded to the nearest whole cent. CQH’s fiscal year ends on December 31.

 

     High ($)      Low ($)      Cash
Dividend
Per CQH
Common
Share ($)*
 

2015:

        

Third Quarter

     23.85        17.71        0.020  

Fourth Quarter

     21.21        14.91        0.020  

2016:

        

First Quarter

     18.41        12.04        0.020  

Second Quarter

     21.33        16.94        0.020  

Third Quarter

     22.84        18.73        0.020  

Fourth Quarter

     23.05        19.00        0.020  

2017:

        

First Quarter

     24.70        22.31        0.020  

Second Quarter

     27.45        24.08        0.020  

Third Quarter

     27.42        24.03        0.450  

Fourth Quarter

     28.76        24.53        0.510  

2018:

        

First Quarter

     29.73        26.54        0.560  

Second Quarter

     33.59        26.80        0.560  

Third Quarter (through August 16, 2018)

     32.12        28.33     

 

(*)

This amount of the dividend shown in this column with respect to each fiscal quarter is the dividend that was declared in such quarter, which may be different from the dividend subsequently declared in respect of earnings for such fiscal quarter.

You should obtain current market quotations for CQH Common Shares, as the market price of CQH Common Shares will fluctuate between the date of this consent solicitation/prospectus and the date on which the Merger is completed, at times in between and thereafter. You can obtain these quotations from publicly available sources.

Comparison of Cheniere and CQH Market Prices and Implied Value of CQH Common Shares

The following table sets forth the closing sale price per share of Cheniere Common Stock and CQH Common Shares as reported on the NYSE American on June 18, 2018, the last trading day prior to the public announcement of the Merger, and on August 16, 2018, the last practicable trading day before the filing of this consent solicitation/prospectus with the SEC. The table also shows the estimated implied value of each CQH Common Share as of the same two dates. This implied value was calculated by multiplying the closing price of a share of Cheniere Common Stock on the relevant date by the Exchange Ratio of 0.4750.

 

     Cheniere
Common
Stock
     CQH
Common
Shares
     Implied
Value

of CQH
Common
Shares
 

June 18, 2018

   $ 65.12      $ 30.28      $ 30.93  

August 16, 2018

   $ 61.23      $ 29.64      $ 29.08  

 

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The market prices of shares of Cheniere Common Stock and CQH Common Shares have fluctuated since the date of the announcement of the Merger Agreement and will continue to fluctuate prior to, and in the case of shares of Cheniere Common Stock, after, completion of the Merger. No assurance can be given concerning the market prices of Cheniere Common Stock or CQH Common Shares before completion of the Merger or of Cheniere Common Stock after completion of the Merger. The Exchange Ratio is fixed in the Merger Agreement, but the market price of shares of Cheniere Common Stock (and therefore the value of the Merger Consideration) when received by CQH Shareholders after the Merger is completed could be greater than, less than or the same as shown in the table above. Accordingly, these comparisons may not provide meaningful information to CQH Shareholders in determining whether to consent to the approval of the Merger Agreement and the Merger. CQH Shareholders are encouraged to obtain current market quotations for shares of Cheniere Common Stock and CQH Common Shares and to review carefully the other information contained in this consent solicitation/prospectus or incorporated by reference herein. For more information, please read the section titled “Where You Can Find More Information” beginning on page 92.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material U.S. federal income tax consequences of the Merger to CQH Shareholders and the material U.S. federal income tax consequences to CQH Shareholders of the ownership and disposition of shares of Cheniere Common Stock received in the Merger and is the opinion of Sullivan & Cromwell. This summary is based on the Code, Treasury Regulations issued under the Code and judicial and administrative interpretations thereof, each as in effect as of the date of this consent solicitation/prospectus, all of which are subject to change at any time, possibly with retroactive effect. This discussion assumes that CQH Shareholders hold their CQH Common Shares, and will hold their shares of Cheniere Common Stock received in the Merger, as capital assets within the meaning of Section 1221 of the Code. This summary does not discuss all of the tax consequences that may be relevant to particular CQH Shareholders in light of their individual circumstances, including any tax consequences arising under the Medicare contribution tax on net investment income or the alternative minimum tax, or to CQH Shareholders subject to special treatment under the federal income tax laws (including, but not limited to, insurance companies, financial institutions, tax-exempt organizations, partnerships or other pass-through entities (and persons holding CQH Common Shares or shares of Cheniere Common Stock, as applicable, through a partnership or other pass-through entity), retirement plans, regulated investment companies, real estate investment trusts, dealers in securities or currencies, traders in securities who elect to apply a mark-to-market method of accounting, persons holding CQH Common Shares or shares of Cheniere Common Stock, as applicable, as part of a “straddle,” “constructive sale” or “conversion transaction” for U.S. federal income tax purposes, or as part of some other integrated investment, individuals who receive Cheniere Common Stock upon the exercise of employee stock options or otherwise as compensation, “passive foreign investment companies” or “controlled foreign corporations,” and corporations that accumulate earnings to avoid U.S. federal income tax, expatriates or persons whose functional currency for tax purposes is not the U.S. dollar).

If an entity or arrangement that is treated as a partnership for U.S. federal income tax purposes holds CQH Common Shares or shares of Cheniere Common Stock, the tax treatment of a partner in the partnership generally will depend on the status of the partner and upon the activities of the partnership. A holder that is a partnership and the partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of the Merger and the ownership and disposition of Cheniere Common Stock.

This summary also does not discuss any tax consequences arising under the laws of any state, local, foreign or other tax jurisdiction.

As used herein, the term “U.S. holder” means a beneficial owner of CQH Common Shares or Cheniere Common Stock, as applicable, that is for U.S. federal income tax purposes:

 

   

an individual citizen or resident of the United States;

 

   

a corporation created or organized under the laws of the United States or any of its political subdivisions;

 

   

a trust that (i) is subject to the supervision of the court within the United States and the control of one or more U.S. persons or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or

 

   

an estate that is subject to United States federal income taxation on its income regardless of its source.

As used herein, the term “non-U.S. holder” means a beneficial owner (other than an entity or arrangement that is treated as a partnership for U.S. federal income tax purposes) of CQH Common Shares or shares of Cheniere Common Stock that is not a U.S. holder.

CQH SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER AND OF OWNING AND

 

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DISPOSING OF SHARES OF CHENIERE COMMON STOCK IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY AFFECT THE TAX CONSEQUENCES DESCRIBED BELOW.

Tax Consequences of the Merger

It is a condition to the completion of the Merger that CQH obtain an opinion of 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 Code. The opinion of Sullivan & Cromwell will be based on, among other things, certain facts, representations, covenants and assumptions, all of which must be consistent with the state of facts existing as of the Effective Time of the Merger. If any of these representations, statements and covenants are, or become, inaccurate or incomplete, the opinion of Sullivan & Cromwell may be invalid and the conclusions reached therein could be jeopardized. An opinion of Sullivan & Cromwell neither binds the Internal Revenue Service (“IRS”) nor precludes the IRS or the courts from adopting a contrary position. Neither Cheniere nor CQH intends to request any ruling from the IRS as to the U.S. federal income tax consequences of the Merger. No assurance can be given that the IRS will not challenge the conclusions reflected herein or in the opinion of Sullivan & Cromwell or that a court would not sustain such a challenge.

U.S. Federal Income Tax Treatment of the Merger

Assuming the Merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code, the U.S. federal income tax consequences of the Merger will be as follows: (i) no gain or loss will be recognized by Cheniere, Merger Sub or CQH as a result of the Merger; (ii) no gain or loss will be recognized by CQH Shareholders, and no amount will be included in such holders’ income, as a result of the Merger (except for any gain or loss that may result from the receipt of cash in lieu of fractional shares of Cheniere Common Stock that CQH Shareholders would otherwise be entitled to receive); (iii) the aggregate tax basis of the Cheniere Common Stock received in the Merger (including any fractional share of Cheniere Common Stock for which cash is received) in the hands of each CQH Common Shareholder after the Merger will be the same as such holder’s aggregate tax basis of the CQH Common Shares held by such holder immediately before the Merger and (iv) the holding period of the Cheniere Common Stock in the Merger will include the holding period of the CQH Common Shares at the time of the Merger.

If U.S. holders of CQH Common Shares acquired different blocks of CQH Common Shares at different times or at different prices, such holders’ tax basis and holding period may be determined within reference to each block of CQH Common Shares. Any such holders should consult their tax advisors regarding the manner in which Cheniere Common Stock received in the Merger should be allocated among different blocks of CQH Common Shares and with respect to identifying the bases or holding periods of the particular CQH Common Shares received in the Merger.

Cash Received in Lieu of a Fractional Share

A U.S. holder of CQH Common Shares who receives cash in lieu of a fractional share of Cheniere Common Stock in the Merger will be treated as having received such fractional share pursuant to the Merger and then as having exchanged such fractional share for cash in a redemption by Cheniere. As a result, such U.S. holder will generally recognize gain or loss in an amount equal to the difference between the amount of cash received and such CQH Shareholder’s adjusted tax basis in such fractional share. Such gain or loss will be long-term capital gain or loss if the CQH Shareholder’s holding period for its CQH Common Shares exceeds one year at the time of the Merger. Under current law, long-term capital gains of certain non-corporate holders are taxed at lower rates than items of ordinary income. The deductibility of capital losses is subject to limitations. See the above discussion regarding blocks of stock that were purchased at different times or at different prices.

 

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Information Reporting and Backup Withholding

Payments of cash to a U.S. holder of CQH Common Shares in lieu of a fractional share of Cheniere Common Stock pursuant to the Merger may be subject to information reporting and backup withholding, unless such CQH Shareholder delivers a properly completed IRS Form W-9, providing such CQH Shareholder’s correct taxpayer identification number and certain other information, or otherwise establishes a basis for exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against such holder’s U.S. federal income tax liability provided that the required information is timely furnished to the IRS.

Tax Consequences to U.S. Holders of Cheniere Common Stock

The following discussion is a summary of certain U.S. federal income tax consequences of the ownership and disposition of shares of Cheniere Common Stock to U.S. holders who receive Cheniere Common Stock pursuant to the Merger.

Taxation of Dividends

Cash distributions paid on shares of Cheniere Common Stock will be treated as a dividend to the extent paid out of Cheniere’s current or accumulated earnings and profits (as determined for U.S. federal income tax principles) and will be includible in income by the U.S. holder and taxable as ordinary income when received. If a distribution exceeds Cheniere’s current and accumulated earnings and profits, the excess will be first treated as a tax-free return of the U.S. holder’s investment, up to the U.S. holder’s tax basis in the shares of Cheniere Common Stock. Any remaining excess will be treated as capital gain. Dividends received by non-corporate U.S. holders will be eligible to be taxed at reduced rates if the U.S. holders meet certain holding period and other applicable requirements. Dividends received by corporate U.S. holders will be eligible for the dividends-received deduction if the U.S. holders meet certain holding period and other applicable requirements.

Sale or Other Taxable Dispositions of Shares of Cheniere Common Stock

Upon the sale or other taxable dispositions of shares of Cheniere Common Stock, a U.S. holder generally will recognize capital gain or loss equal to the difference between the amount of cash and the fair market value of any property received upon such taxable disposition and the U.S. holder’s tax basis in the Cheniere Common Stock. Such gain or loss will generally be capital gain or loss and will be long-term capital gain or loss if the U.S. holder’s holding period in the shares of Cheniere Common Stock is more than one year at the time of the taxable disposition. Under current law, long-term capital gains of certain non-corporate holders are taxed at lower rates than items of ordinary income. The deductibility of capital losses is subject to limitations.

Information Reporting and Backup Withholding

Information reporting requirements generally will apply to payments of dividends on shares of Cheniere Common Stock and to the proceeds of a sale, exchange, redemption or other disposition of a share of Cheniere Common Stock paid to a U.S. holder unless the U.S. holder is an exempt recipient such as a corporation. Backup withholding will apply to those payments if the U.S. holder fails to provide its correct taxpayer identification number, or certification of exempt status, or (in the case of dividend payments) if the U.S. holder is notified by the IRS that it has failed to report in full payments of interest and dividend income. Any amounts withheld under the backup withholding rules may be refunded or credited against such U.S. holder’s U.S. federal income tax liability provided that the required information is timely furnished to the IRS.

 

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Tax Consequences to Non-U.S. Holders of Cheniere Common Stock

The following discussion is a summary of certain U.S. federal income tax consequences of the ownership and disposition of shares of Cheniere Common Stock to non-U.S. holders who receive Cheniere Common Stock pursuant to the Merger.

Taxation of Dividends

Any dividends paid to a non-U.S. holder with respect to shares of Cheniere Common Stock will be subject to withholding tax at a 30% rate or at a reduced rate specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business within the United States and, where an income tax treaty applies, are attributable to a U.S. permanent establishment or fixed base, are not subject to the withholding tax, but instead are subject to U.S. federal income tax on a net income basis at applicable graduated individual or corporate rates. Certification requirements and disclosure requirements must be complied with in order for effectively connected income to be exempt from withholding. Any such effectively connected income received by a foreign corporation may, under some circumstances, be subject to an additional branch profits tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty).

A non-U.S. holder of shares of Cheniere Common Stock that wishes to claim the benefit of an applicable treaty rate is required to satisfy applicable certification and other requirements, generally by providing IRS Form W-8BEN or IRS Form W-8BEN-E. If a non-U.S. holder is eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty, it may obtain a refund from the IRS of any excess amounts withheld by timely providing the required information or appropriate claim for refund to the IRS.

Sale or Other Taxable Dispositions of Shares of Cheniere Common Stock

Subject to the discussion of backup withholding and FATCA withholding requirements below, any gain recognized by a non-U.S. holder on the sale or other taxable disposition of shares of Cheniere Common Stock, generally will not be subject to U.S. federal income tax unless:

 

   

the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and other conditions are met;

 

   

that gain is effectively connected with a non-U.S. holder’s conduct of a trade or business in the United States (and, if required by an applicable income treaty, is attributable to a U.S. permanent establishment or fixed base); or

 

   

Cheniere is or has been a U.S. real property holding corporation (a “USRPHC”) for U.S. federal income tax purposes at any time within the five-year period preceding the sale or other disposition or the non-U.S. holder’s holding period, whichever period is shorter.

A non-U.S. holder described in the first bullet point above will be subject to tax at a flat rate of 30% (or such lower rate as may be specified by an applicable income tax treaty) on the gain recognized on the sale or other taxable disposition of shares of Cheniere Common Stock (which gain may be offset by U.S. source capital losses), even though the non-U.S. holder is not considered a resident of the United States.

A non-U.S. holder who is an individual described in the second bullet point above will be subject to tax at regular graduated U.S. federal income tax rates on the net gain derived from the sale or other taxable disposition of shares of Cheniere Common Stock, generally in the same manner as if such holder were a U.S. holder. A foreign corporation that falls under the second bullet point above will be subject to tax on such holder’s net gain generally in the same manner as if such holder were a U.S. person as defined under the Code and, in addition, such holder may be subject to the branch profits tax equal to 30% of the holder’s effectively connected earnings and profits, or at such lower rate as may be specified by an applicable income tax treaty.

 

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A domestic corporation is considered a USRPHC if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Cheniere believes that it is currently not a USRPHC. In the event that Cheniere becomes a USRPHC, so long as Cheniere Common Stock continues to be “regularly traded on an established securities market” within the meaning of applicable Treasury Regulations, only a non-U.S. holder that actually owns, or is treated as owning under applicable constructive ownership rules, within the time period described in the third bullet point above, more than 5% of the shares of Cheniere Common Stock, will be subject to U.S. federal income tax on the disposition thereof.

Information Reporting and Backup Withholding

Generally, dividends paid to a non-U.S. holder of shares of Cheniere Common Stock and the amount of tax, if any, withheld with respect to those payments must be reported to the IRS on IRS Form 1042 and to the non-U.S. holder. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which a non-U.S. holder resides under the provisions of an applicable income tax treaty. A non-U.S. holder is generally exempt from backup withholding and information reporting requirements (other than the Form 1042 reporting described above) in respect of payments of dividends made within the United States and the payment of the proceeds from the sale of shares of Cheniere Common Stock effected at a United States office of a broker, as long as either (i) the payor or broker does not have actual knowledge or reason to know that such non-U.S. holder is a U.S. person and such non-U.S. holder has furnished a valid IRS Form W-8 or other documentation upon which the payor or broker may rely to treat the payments as made to a non-U.S. person, or (ii) such non-U.S. holder has otherwise established an exemption. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability provided the required information is furnished timely to the IRS.

Additional Withholding Tax on Payments Made to Foreign Accounts

Sections 1471 through 1474 of the Code (commonly referred to as “FATCA”) and applicable Treasury Regulations impose a 30% U.S. federal withholding tax on withholdable payments (as defined below) made to a foreign financial institution, unless such institution enters into an agreement with the Department of Treasury to, among other things, collect and provide to it substantial information regarding such institution’s United States financial account holders, including certain account holders that are foreign entities with United States owners, or such institution is otherwise treated as complying with FATCA. FATCA also generally imposes a 30% U.S. federal withholding tax on withholdable payments to a nonfinancial foreign entity unless such entity provides the paying agent with a certification that it does not have any substantial United States owners or a certification identifying the direct and indirect substantial United States owners of the entity. “Withholdable payments” include payments of interest and dividend payments from sources within the United States, as well as gross proceeds from the sale of any property of a type which can produce interest or dividends from sources within the United States, unless the payments of interest, dividends or gross proceeds are effectively connected with the conduct of a United States trade or business and taxed as such. These withholding and reporting requirements apply currently with respect to dividends on the common stock, but will not apply to withholding on gross proceeds on the sale or other taxable disposition of shares of Cheniere Common Stock unless such a disposition occurs after December 31, 2018. A foreign financial institution located in a jurisdiction that has an intergovernmental agreement with the United States governing FATCA may be subject to different rules. Prospective investors are urged to consult their own tax advisors regarding the application of withholding under FATCA to shares of Cheniere Common Stock.

 

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NO DISSENTERS’ OR APPRAISAL RIGHTS

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

Under Delaware law, Cheniere Stockholders are not entitled to dissenters’ rights in connection with the issuance of Cheniere Common Stock as contemplated by the Merger Agreement.

 

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VALIDITY OF COMMON STOCK

The validity of shares of Cheniere Common Stock to be issued in the Merger will be passed upon for Cheniere by Sidley Austin LLP.

LEGAL MATTERS

Certain tax matters relating to the Merger will be passed upon for Cheniere and CQH by Sullivan & Cromwell LLP.

 

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EXPERTS

The consolidated financial statements of Cheniere Energy, Inc. as of December 31, 2017 and 2016, and for each of the years in the three-year period ended December 31, 2017, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2017, have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of such firm as experts in accounting and auditing.

The audit report covering the consolidated financial statements as of December 31, 2017 and 2016, and for each of the years in the three-year period ended December 31, 2017 refers to a change in the method of accounting for revenue recognition.

The consolidated financial statements of Cheniere Energy Partners LP Holdings, LLC as of December 31, 2017 and 2016, and for each of the years in the three-year period ended December 31, 2017, and management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2017, have been incorporated by reference herein in reliance upon the reports of KPMG LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of such firm as experts in accounting and auditing.

 

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WHERE YOU CAN FIND MORE INFORMATION

Cheniere and CQH file annual, quarterly and current reports, proxy statements and other information with the SEC under the Exchange Act. You may read and copy any document filed with the SEC at its public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room.

The SEC also maintains an internet site (http://www.sec.gov) that contains the reports, proxy statements and other information filed by Cheniere and CQH electronically with the SEC. In addition, documents filed by Cheniere and CQH can be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.

Cheniere has filed a registration statement on Form S-4 with the SEC under the Securities Act to register the shares of Cheniere Common Stock to be issued in the Merger. This consent solicitation/prospectus constitutes the prospectus of Cheniere filed as part of the registration statement. This consent solicitation/prospectus does not contain all of the information that Cheniere Stockholders and CQH Shareholders can find in the registration statement or the exhibits to the registration statement because certain parts of the registration statement are omitted in accordance with the rules and regulations of the SEC. The registration statement and its exhibits contain important information about Cheniere and CQH and their respective businesses, financial conditions and results of operations and are available for inspection and copying as indicated above.

The SEC allows Cheniere and CQH to incorporate certain information into this document by reference to other information that has been filed with the SEC. The information incorporated by reference is deemed to be part of this document, except for any information that is superseded by information in this document or by more recent information incorporated by reference into this document. The documents that are incorporated by reference contain important information about the companies and you should read this document together with any other documents incorporated by reference in this document.

This consent solicitation/prospectus incorporates by reference the documents listed below that Cheniere and CQH have previously filed with the SEC, excluding any information in any Current Report on Form 8-K furnished pursuant to Item 2.02 or 7.01 (unless otherwise indicated), which is not deemed filed under the Exchange Act. All additional documents filed by Cheniere or CQH with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the filing of the initial registration statement of which this consent solicitation/prospectus forms a part and prior to the effectiveness of such registration statement, and after the date of this consent solicitation/prospectus and prior to the date on which the Merger is consummated are also deemed to be incorporated by reference. However, any documents or portions thereof or any exhibits thereto that Cheniere or CQH furnish to, but do not file with, the SEC will not be incorporated or deemed to be incorporated by reference into this consent solicitation/prospectus.

Cheniere’s Filings (SEC File No. 001-16383)

 

   

Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on February 21, 2018, as amended by Amendment No. 1 thereto filed with the SEC on April 30, 2018;

 

   

Quarterly Reports on Form 10-Q for the quarter ended March 31, 2018, as filed with the SEC on May 4, 2018 and for the quarter ended June 30, 2018, as filed with the SEC on August 9, 2018;

 

   

Proxy Statement on Schedule 14A, as filed with the SEC on April 13, 2018;

 

   

Current Reports on Form 8-K, as filed with the SEC on May 1, 2018, May 4, 2018, May 17, 2018, May 21, 2018, May 23, 2018, May 24, 2018, May 25, 2018, June 19, 2018, July 2, 2018 and July 17, 2018 (excluding for all such Current Reports the information, if any, furnished under Item 7.01 thereof and corresponding information furnished under Item 9.01 or included as an exhibit thereto); and

 

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The description of Cheniere Common Stock in the registration statement on Form S-3ASR filed on May 24, 2018, and including any other amendments or reports filed for the purpose of updating such description.

You may request a copy of these filings at no cost, by writing or telephoning Cheniere at the following address:

Cheniere Energy, Inc.

700 Milam Street, Suite 1900

Houston, TX 77002

Attention: Investor Relations Department

713-375-5000

corporatesecretary@cheniere.com

CQH’s Filings (SEC File No. 001-36234)

 

   

Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on February 21, 2018;

 

   

Quarterly Reports on Form 10-Q for the quarter ended March 31, 2018, as filed with the SEC on May 4, 2018 and for the quarter ended June 30, 2018, as filed with the SEC on August 9, 2018; and

 

   

Current Reports on Form 8-K filed with the SEC on May 17, 2018 and June 19, 2018 (excluding for all such Current Reports the information, if any, furnished under Item 7.01 thereof and corresponding information furnished under Item 9.01 or included as an exhibit thereto).

You may request a copy of these filings at no cost, by writing or telephoning CQH at the following address:

Cheniere Energy Partners LP Holdings, LLC

700 Milam Street, Suite 1900

Houston, TX 77002

Attention: Investor Relations Department

713-375-5000

corporatesecretary@cheniere.com

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 files them with, or furnishes 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

 

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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.

You should rely only on the information contained or incorporated by reference in this consent solicitation/prospectus. None of Cheniere, CQH or any of their affiliates has authorized anyone to provide you with information different from that contained or incorporated by reference in this consent solicitation/prospectus. Therefore, if anyone gives you information of this sort, you should not rely on it. The information contained in this consent solicitation/prospectus and the documents incorporated by reference is accurate only as of its respective dates, regardless of the time of delivery of this consent solicitation/prospectus. Cheniere and CQH’s business, financial condition, results of operations and prospects may have changed since those dates.

 

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INDEX TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

Unaudited Pro Forma Consolidated Financial Statements

     F-2  

Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2018

     F-4  

Unaudited Pro Forma Consolidated Statement of Operations for the six months ended June 30, 2018

     F-5  

Unaudited Pro Forma Consolidated Statement of Operations for the year ended December 31, 2017

     F-6  

Notes to Unaudited Pro Forma Consolidated Financial Statements

     F-7  

 

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma consolidated financial statements of Cheniere consist of an unaudited pro forma consolidated balance sheet as of June 30, 2018, and unaudited pro forma consolidated statements of operations for the six months ended June 30, 2018 and the year ended December 31, 2017, which reflect Cheniere’s acquisition of CQH, expected to close by the end of the third quarter 2018. The unaudited pro forma consolidated financial statements included herein have been derived from the following historical financial statements:

 

   

the audited consolidated financial statements of Cheniere for the year ended December 31, 2017;

 

   

the unaudited consolidated interim financial statements of Cheniere for the six months ended June 30, 2018;

 

   

the audited consolidated financial statements of CQH for the year ended December 31, 2017; and

 

   

the unaudited consolidated interim financial statements of CQH for the six months ended June 30, 2018.

In April and May 2018, Cheniere acquired a total of 21,453,482 common shares of CQH in a series of privately negotiated transactions pursuant to share purchase and exchange agreements, in exchange for a total of 10,278,739 unregistered shares of Cheniere. Subsequent to the completion of these transactions, Cheniere’s ownership of CQH was approximately 91.9%.

On June 18, 2018, Cheniere entered into an Agreement and Plan of Merger with CQH, under which Cheniere will acquire all of the publicly-held shares of CQH not already owned by Cheniere in a stock for share transaction pursuant to which CQH Shareholders will receive a fixed exchange ratio of 0.4750 Cheniere shares for each outstanding publicly-held share of CQH. Following completion of the proposed acquisition, CQH will merge with and into Merger Sub, with Merger Sub continuing as the surviving entity and a wholly owned subsidiary of Cheniere.

The pro forma adjustments have been prepared as if the acquisition of all publicly-held shares of CQH not already owned by Cheniere occurred on June 30, 2018 in the case of the unaudited pro forma consolidated balance sheet and on January 1, 2017 in the case of the unaudited pro forma consolidated statements of operations. The unaudited pro forma consolidated financial statements should be read in conjunction with the related notes, which are included herein, the financial statements and notes included in Cheniere’s Annual Report on Form 10-K for the year ended December 31, 2017, as recast in its Current Report on Form 8-K, filed on May 23, 2018, and Quarterly Report on Form 10-Q for the six months ended June 30, 2018, and the financial statements and notes included in CQH’s Annual Report on Form 10-K for the year ended December 31, 2017 and Quarterly Report on Form 10-Q for the six months ended June 30, 2018.

The acquisition will be accounted for in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 810, Consolidation-Overall-Changes in a Parent’s Ownership Interest in a Subsidiary (“ASC 810”). Because Cheniere controls CQH both before and after the acquisition, the changes in Cheniere’s ownership interest in CQH will be accounted for as an equity transaction and no gain or loss will be recognized in Cheniere’s consolidated statements of operations resulting from the acquisition.

The unaudited pro forma consolidated financial statements do not necessarily reflect what Cheniere’s financial position and results of operations would have been if it had wholly owned CQH during the periods presented. In addition, they are not necessarily indicative of its future results of operations or financial condition. The assumptions and adjustments give pro forma effect to events, described below, that are (i) directly attributable to Cheniere’s acquisition of CQH, (ii) factually supportable, and (iii) with respect to the unaudited pro forma consolidated statements of operations, expected to have a continuing impact on Cheniere. The actual adjustments may differ from the pro forma adjustments.

 

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The unaudited pro forma consolidated financial statements give effect to Cheniere’s acquisition of CQH for total consideration consisting of the right to receive either Cheniere shares based on terms specified in privately negotiated stock for share transactions in April and May 2018, where applicable, or 0.4750 of a share of Cheniere Common Stock for each share of CQH Common Share based on the terms specified in the Agreement and Plan of Merger with CQH.

 

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

As of June 30, 2018

(in millions)

 

     Cheniere
Historical
    Pro Forma
Adjustments
    Pro
Forma
 
ASSETS       

Current assets

      

Cash and cash equivalents

   $ 874     $ —       $ 874  

Restricted cash

     2,386       —         2,386  

Accounts and other receivables

     278       —         278  

Accounts receivable—related party

     2       —         2  

Inventory

     233       —         233  

Derivative assets

     37       —         37  

Other current assets

     156       —         156  
  

 

 

   

 

 

   

 

 

 

Total current assets

     3,966       —         3,966  

Non-current restricted cash

     11       —         11  

Property, plant and equipment, net

     25,760       —         25,760  

Debt issuance costs, net

     97       —         97  

Non-current derivative assets

     107       —         107  

Goodwill

     77       —         77  

Other non-current assets, net

     309       —         309  
  

 

 

   

 

 

   

 

 

 

Total assets

   $ 30,327     $ —       $ 30,327  
  

 

 

   

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY       

Current liabilities

      

Accounts payable

   $ 29     $ —       $ 29  

Accrued liabilities

     1,382       6 (a)      1,388  

Current debt

     137       —         137  

Deferred revenue

     99       —         99  

Derivative liabilities

     81       —         81  
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     1,728       6       1,734  

Long-term debt, net

     26,782       —         26,782  

Non-current derivative liabilities

     24       —         24  

Other non-current liabilities

     59       —         59  

Stockholders’ equity

      

Preferred stock

     —         —         —    

Common stock

     1       —   (b)      1  

Treasury stock

     (394     —         (394

Additional paid-in-capital

     3,664       320 (b)      3,984  

Accumulated deficit

     (4,288     —         (4,288
  

 

 

   

 

 

   

 

 

 

Total stockholders’ deficit

     (1,017     320       (697

Non-controlling interest

     2,751       (326 )(b)      2,425  
  

 

 

   

 

 

   

 

 

 

Total equity

     1,734       (6     1,728  
  

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   $ 30,327     $ —       $ 30,327  
  

 

 

   

 

 

   

 

 

 

 

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the six months ended June 30, 2018

(in millions, except per share data)

 

     Cheniere
Historical
    Pro Forma
Adjustments
    Pro
Forma
 

Revenues

LNG revenues

   $ 3,608     $ —       $ 3,608  

Regasification revenues

     130       —         130  

Other revenues

     43       —         43  

Other—related party

     4       —         4  
  

 

 

   

 

 

   

 

 

 

Total revenues

     3,785       —         3,785  

Operating costs and expenses

      

Cost of sales (excluding depreciation and amortization expense shown separately below)

     2,051       —         2,051  

Operating and maintenance expense

     287       —         287  

Development expense

     4       —         4  

Selling, general and administrative expense

     140       —         140  

Depreciation and amortization expense

     220       —         220  
  

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     2,702       —         2,702  
  

 

 

   

 

 

   

 

 

 

Income from operations

     1,083       —         1,083  

Other income (expense)

      

Interest expense, net of capitalized interest

     (432     —         (432

Loss on modification or extinguishment of debt

     (15     —         (15

Derivative gain, net

     109       —         109  

Other income

     17       —         17  
  

 

 

   

 

 

   

 

 

 

Total other expense

     (321     —         (321
  

 

 

   

 

 

   

 

 

 

Income before income taxes and non-controlling interest

     762       —         762  

Income tax provision

     (12     —         (12
  

 

 

   

 

 

   

 

 

 

Net income

     750       —         750  

Less: net income attributable to non-controlling interest

     411       (52 )(c)      359  
  

 

 

   

 

 

   

 

 

 

Net income attributable to common stockholders

   $ 339     $ 52     $ 391  
  

 

 

   

 

 

   

 

 

 

Net income per share attributable to common stockholders—basic

   $ 1.42       $ 1.53  
  

 

 

     

 

 

 

Net income per share attributable to common stockholders—diluted

   $ 1.40       $ 1.52  
  

 

 

     

 

 

 

Weighted average number of common shares outstanding—basic

     239.2       15.6 (d)      254.8  

Weighted average number of common shares outstanding—diluted

     241.7       15.6 (d)      257.3  

 

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the year ended December 31, 2017

(in millions, except per share data)

 

     Cheniere
Historical
    Pro Forma
Adjustments
    Pro
Forma
 

Revenues

      

LNG revenues

   $ 5,317     $ —       $ 5,317  

Regasification revenues

     260       —         260  

Other revenues

     21       —         21  

Other—related party

     3       —         3  
  

 

 

   

 

 

   

 

 

 

Total revenues

     5,601       —         5,601  

Operating costs and expenses

      

Cost of sales (excluding depreciation and amortization expense shown separately below)

     3,120       —         3,120  

Operating and maintenance expense

     446       —         446  

Development expense

     10       —         10  

Selling, general and administrative expense

     256       —         256  

Depreciation and amortization expense

     356       —         356  

Restructuring expense

     6       —         6  

Impairment expense and loss on disposal of assets

     19       —         19  
  

 

 

   

 

 

   

 

 

 

Total operating costs and expenses

     4,213       —         4,213  
  

 

 

   

 

 

   

 

 

 

Income from operations

     1,388       —         1,388  

Other income (expense)

      

Interest expense, net of capitalized interest

     (747     —         (747

Loss on modification or extinguishment of debt

     (100     —         (100

Derivative gain, net

     7       —         7  

Other income

     18       —         18  
  

 

 

   

 

 

   

 

 

 

Total other expense

     (822     —         (822
  

 

 

   

 

 

   

 

 

 

Income before income taxes and non-controlling interest

     566       —         566  

Income tax provision

     (3     —         (3
  

 

 

   

 

 

   

 

 

 

Net income

     563       —         563  

Less: net income attributable to non-controlling interest

     956       (44 )(c)      912  
  

 

 

   

 

 

   

 

 

 

Net loss attributable to common stockholders

   $ (393   $ 44     $ (349
  

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common stockholders—basic and diluted (1)

   $ (1.68     $ (1.38
  

 

 

     

 

 

 

Weighted average number of common shares outstanding—basic and diluted

     233.1       19.2 (d)      252.3  

 

(1)

Earnings per share in the table may not recalculate exactly due to rounding because it is calculated based on whole numbers, not the rounded numbers presented.

 

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Basis of Pro Forma Presentation

The Cheniere historical consolidated financial statements and the unaudited pro forma consolidated financial statements include the accounts of Cheniere, its majority owned subsidiaries and entities in which it holds a controlling interest, including the accounts of CQH. All significant intercompany accounts and transactions have been eliminated in consolidation.

The unaudited pro forma consolidated financial statements give effect to Cheniere’s acquisition of all publicly-held shares of CQH not already owned as an equity transaction. The unaudited pro forma consolidated balance sheet gives effect to Cheniere’s acquisition of all publicly-held shares of CQH not already owned as if it had occurred on June 30, 2018. The unaudited pro forma consolidated statements of operations for the six months ended June 30, 2018 and the year ended December 31, 2017 give effect to the acquisition as if it had occurred on January 1, 2017.

These unaudited pro forma consolidated financial statements are presented for illustrative purposes only. The pro forma adjustments are based upon available information and the assumptions described below. The unaudited pro forma consolidated financial statements are not necessarily indicative of what the actual results of operations or financial position of Cheniere would have been if the acquisition had, in fact, occurred on the dates or for the periods indicated, nor do they purport to project the results of operations or financial position of Cheniere for any future periods or as of any date. The unaudited pro forma consolidated financial statements do not give effect to any cost savings or operating synergies expected to result from the acquisition or the costs to achieve these cost savings or operating synergies.

The following is the estimated fair value of the equity consideration for the acquisition (in millions, except per share amounts):

 

Consideration for shares purchased in April and May 2018 through privately negotiated stock for share transactions:

  

Total CQH Common Shares exchanged

     21.5  

Exchange ratio per share (1)

     0.4791  

Cheniere Common Stock assumed issued

     10.3  

Cheniere Common Stock closing price (2)

   $ 58.63  

Fair value of equity consideration

   $ 603  

Consideration for shares proposed to be purchased under the Agreement and Plan of Merger with CQH:

  

Total CQH Common Shares exchanged

     18.7  

Exchange ratio per share

     0.4750  

Cheniere Common Stock assumed issued

     8.9  

Cheniere Common Stock closing price as of August 15, 2018

   $ 60.28  

Fair value of equity consideration

   $ 537  

Total consideration:

  

Total CQH Common Shares exchanged

     40.2  

Cheniere Common Stock assumed issued

     19.2  

Fair value of equity consideration

   $ 1,140  

 

(1)

Weighted average exchange ratio of the series of privately negotiated stock for share transactions.

(2)

Weighted average closing price of Cheniere Common Stock as of the dates of privately negotiated stock for share transactions.

 

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CHENIERE ENERGY, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

Note 2—Pro Forma Adjustments and Assumptions

Unaudited Pro Forma Consolidated Balance Sheet Adjustments

 

  (a)

Reflects estimated accrued transaction costs of $6 million directly attributable to the acquisition. The transaction costs include fees related to financial advisory, legal, and other professional services and are expected to be paid in 2018. As the transaction involves the acquisition of non-controlling interests accounted for as an equity transaction, these costs will be recognized as an adjustment to total equity during the periods in which services are rendered.

 

  (b)

The acquisition, which involves a change in Cheniere’s ownership interest in its consolidated subsidiary, CQH, has been accounted for as an equity transaction in accordance with ASC 810 in preparing these unaudited pro forma consolidated financial statements. The following table reflects pro forma adjustments to components of total equity (in millions):

 

    Total Stockholders’ Equity              
    Common Stock     Treasury
Stock
    Additional
Paid-in
Capital
    Accumulated
Deficit
    Non-controlling
Interest
    Total
Equity
 
    Shares     Par
Value
Amount
 

Shares issued for the transaction (1)

    8.9     $ —       $ —       $ 537     $ —       $ —       $ 537  

Transaction costs, net of tax

    —         —         —         (6     —         —         (6

Eliminate non-controlling interest related to CQH (2)

    —         —         —         (211     —         (326     (537
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total pro forma adjustments

    8.9     $ —       $ —       $ 320     $ —       $ (326   $ (6

 

(1)

Excludes the effect of privately negotiated stock for share transactions completed in April and May 2018.

(2)

Reflects the June 30, 2018 book value of publicly-held interest in CQH.

Unaudited Pro Forma Consolidated Statements of Operations Adjustments

 

  (c)

Reclassifies net income previously allocated to non-controlling interests related to publicly-held CQH Common Shares to net income (loss) attributable to Cheniere common stockholders. Excludes the effect of any reallocation of amortized costs of the beneficial conversion feature for Cheniere Partners’ Class B units, which amortized through their conversion date of August 2, 2017, as described in Cheniere’s annual report on Form 10-K for the year ended December 31, 2017.

 

  (d)

Gives effect to the acquisition of all publicly-held shares of CQH not already owned by Cheniere as if it had occurred on January 1, 2017. Reflects both Cheniere’s acquisition of 21,453,482 CQH Common Shares in a series of privately negotiated transactions pursuant to share purchase and exchange agreements, in exchange for a total of 10,278,739 unregistered shares of Cheniere, in April and May 2018, as well as the assumed issuance of 8.9 million shares of Cheniere Common Stock pursuant to the Merger Agreement with CQH.

 

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ANNEX A

AGREEMENT AND PLAN OF MERGER

Among

CHENIERE ENERGY PARTNERS LP HOLDINGS, LLC,

CHENIERE ENERGY, INC.

and

COLUMBIA ACQUISITION SUB LLC

Dated as of June 18, 2018


Table of Contents

TABLE OF CONTENTS

 

         Page  
  ARTICLE I   
  The Merger; Closing; Effective Time   

1.1.

  The Merger      A-2  

1.2.

  Closing      A-2  

1.3.

  Effective Time      A-2  
  ARTICLE II   
  Effect of the Merger; Exchange of Certificates   

2.1.

  Merger Consideration; Conversion of Company Common Shares      A-2  

2.2.

  Conversion of Company Common Shares      A-3  

2.3.

  Cancellation of Excluded Shares      A-3  

2.4.

  Cancellation of Voting Share      A-3  

2.5.

  Certificate of Formation and Limited Liability Company Agreement of the Surviving Entity      A-3  

2.6.

  Merger Sub      A-3  
  ARTICLE III   
  Delivery of Merger Consideration; Procedures for Surrender   

3.1.

  Exchange Agent      A-3  

3.2.

  Procedures for Surrender      A-4  

3.3.

  Dividends and Distributions with Respect to Unexchanged Company Common Shares      A-5  

3.4.

  Transfers      A-5  

3.5.

  Fractional Shares      A-5  

3.6.

  Termination of Exchange Fund      A-6  

3.7.

  Lost, Stolen or Destroyed Certificates      A-6  

3.8.

  Withholding Rights      A-6  

3.9.

  Appraisal Rights      A-6  

3.10.

  Adjustments to Prevent Dilution      A-6  
  ARTICLE IV   
  Representations and Warranties   

4.1.

  Representations and Warranties of the Company      A-7  

4.2.

  Representations and Warranties of Parent and Merger Sub      A-12  
  ARTICLE V   
  Covenants   

5.1.

  Interim Operations      A-18  

5.2.

  Reasonable Best Efforts      A-19  

5.3.

  Filings; Information Supplied      A-19  

5.4.

  Status      A-20  

 

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         Page  

5.5.

  Stock Exchange Listing and Delisting      A-20  

5.6.

  Publicity      A-20  

5.7.

  Shareholder Litigation      A-21  

5.8.

  Expenses      A-21  

5.9.

  Indemnification; Directors’ and Officers’ Insurance      A-21  

5.10.

  [Intentionally Omitted.]      A-22  

5.11.

  Dividends and Distributions      A-22  

5.12.

  Section 16 Matters      A-22  

5.13.

  Conflicts Committee      A-22  

5.14.

  Reorganization Treatment      A-23  
  ARTICLE VI   
  Conditions   

6.1.

  Conditions to Each Party’s Obligation to Effect the Merger      A-23  

6.2.

  Conditions to Obligations of Parent and Merger Sub      A-24  

6.3.

  Conditions to Obligation of the Company      A-24  
  ARTICLE VII   
  Termination   

7.1.

  Termination by Mutual Consent      A-25  

7.2.

  Termination by Either Parent or the Company      A-25  

7.3.

  Termination by the Company      A-25  

7.4.

  Termination by Parent      A-25  

7.5.

  Effect of Termination and Abandonment      A-26  
  ARTICLE VIII   
  Miscellaneous and General   

8.1.

  Survival      A-26  

8.2.

  Modification or Amendment      A-26  

8.3.

  Waiver of Conditions      A-26  

8.4.

  Counterparts      A-27  

8.5.

  GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL; SPECIFIC PERFORMANCE      A-27  

8.6.

  Notices      A-28  

8.7.

  Entire Agreement      A-29  

8.8.

  No Third-Party Beneficiaries      A-29  

8.9.

  Obligations of Parent and of the Company      A-29  

8.10.

  Transfer Taxes      A-29  

8.11.

  Definitions      A-30  

8.12.

  Severability      A-30  

8.13.

  Interpretation; Construction      A-30  

8.14.

  Assignment      A-30  

 

Annex A

  Defined Terms      AA-1  

Exhibit A

  Support Agreement   

 

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (hereinafter called this “Agreement”), dated as of June 18, 2018, by and among Cheniere Energy Partners LP Holdings, LLC, a Delaware limited liability company (the “Company”), Cheniere Energy, Inc., a Delaware corporation (“Parent”), and Columbia Acquisition Sub LLC, a Delaware limited liability company and a wholly-owned subsidiary of Parent (“Merger Sub”).

RECITALS

WHEREAS, the conflicts committee (the “Conflicts Committee”) of the board of directors of the Company (the “Company Board”) has, acting in good faith, unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the merger of the Company with and into Merger Sub, with Merger Sub as the surviving entity (the “Merger“), are fair and reasonable to, and in the best interest of, the Company and the holders of the Company’s common shares representing limited liability company interests in the Company (each such share, a “Company Common Share”) other than Parent and its affiliates (the “Public Shareholders”), (ii) approved this Agreement and the transactions contemplated hereby, including the Merger, and (iii) recommended that the Company Board approve this Agreement and the transactions contemplated hereby, including the Merger;

WHEREAS, the Company Board, upon the recommendation of the Conflicts Committee, has unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair and reasonable to, and in the best interest of, the Company and the holders of Company Common Shares, (ii) approved this Agreement and the transactions contemplated hereby, including the Merger, (iii) resolved to recommend approval of this Agreement by the members of the Company (the “Members”), and (iv) directed that this Agreement be submitted to the holders of Company Common Shares for their approval by written consent, pursuant to Section 11.10 of the Company Agreement (as defined herein);

WHEREAS, the board of directors of Parent has unanimously approved this Agreement and the transactions contemplated hereby, including the Merger and the issuance of shares of Parent’s common stock, par value $0.003 per share (the “Parent Common Stock”), in connection with the Merger upon the terms and subject to the conditions set forth in this Agreement;

WHEREAS, Parent, in its capacity as the sole member of Merger Sub, has approved this Agreement and the transactions contemplated hereby, including the Merger;

WHEREAS, by virtue and in consideration of the Merger, upon the terms and subject to the conditions set forth in this Agreement, the holders of Company Common Shares (other than Excluded Shares (as defined in Section 2.1(b)) shall receive shares of Parent Common Stock as more particularly set forth in this Agreement;

WHEREAS, concurrently with the execution and delivery of this Agreement, as a condition and an inducement to the parties’ willingness to enter into this Agreement, Parent, as record and beneficial owner of 212,953,991 Company Common Shares, representing 91.9% of the issued and outstanding Company Common Shares as of the date hereof, is entering into a support agreement with the Company (the “Support Agreement”), the form of which is attached as Exhibit A hereto, pursuant to which and on the terms and subject to the conditions thereof, Parent has agreed to vote the Company Common Shares beneficially owned by it in favor of approval of this Agreement and the transactions contemplated hereby, including the Merger;

WHEREAS, the Company, Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with this Agreement; and

WHEREAS, for U.S. federal income tax purposes, it is intended that (i) the Merger shall qualify as a “reorganization” within the meaning of Section 368(a) of the U.S. Internal Revenue Code of 1986, as amended

 

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Table of Contents

(the “Code”), and (ii) this Agreement shall constitute a “plan of reorganization” within the meaning of Treasury Regulation Sections 1.368-2(g) and 1.368-3(a).

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows:

ARTICLE I

The Merger; Closing; Effective Time

1.1.    The Merger. Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.3), the Company shall be merged with and into Merger Sub, whereupon the Company shall cease to exist. Merger Sub shall be the surviving entity in the Merger (sometimes hereinafter referred to as the “Surviving Entity”), and the existence of Merger Sub, with all of its rights, privileges, immunities, powers and franchises, shall continue unaffected by the Merger, except as otherwise set forth herein. The Merger shall be conducted in accordance with and shall have the effects set forth in this Agreement, Section 12.5 of the Amended and Restated Limited Liability Company Agreement of the Company, as amended (the “Company Agreement”), and the applicable provisions of the Delaware Limited Liability Company Act, as amended (the “DLLCA”).

1.2.    Closing. Unless otherwise mutually agreed in writing between the Company and Parent, the closing for the Merger (the “Closing”) shall take place at the offices of Sullivan & Cromwell LLP, 125 Broad Street, New York, New York, at 9:00 a.m. (Eastern Time) on the first Business Day following the day on which the last to be satisfied or waived of the conditions set forth in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions) shall be satisfied or waived in accordance with this Agreement; provided that the Closing shall not occur on or prior to the record date for the Second Quarter Distribution (as defined in Section 5.11) (the “Closing Date”). For purposes of this Agreement, the term “Business Day” shall mean any day ending at 11:59 p.m. (Eastern Time) other than a Saturday or Sunday or a day on which banks are required or authorized to close in the City of New York or a day on which the Secretary of State of the State of Delaware is required or authorized to close.

1.3.    Effective Time. As promptly as practicable on the Closing Date and concurrently with the Closing, Merger Sub will cause a Certificate of Merger (the “Certificate of Merger”) to be duly executed, acknowledged and filed with the Secretary of State of the State of Delaware as provided in Section 18-209 of the DLLCA. The Merger shall become effective at the time when the Certificate of 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 the Company and Parent in writing and specified in the Certificate of Merger (the “Effective Time”).

ARTICLE II

Effect of the Merger; Exchange of Certificates

2.1.    Merger Consideration; Conversion of Company Common Shares.

(a)    At the Effective Time, as a result of the Merger and without any further action on the part of the Company, Parent, Merger Sub or the holder of any limited liability company interest of the Company, each Company Common Share issued and outstanding immediately prior to the Effective Time other than Excluded Shares (such Company Common Shares, the “Eligible Shares”) shall be converted into the right to receive 0.475 shares (the “Exchange Ratio”) of validly issued, fully paid and non-assessable Parent Common Stock (the total number of such shares of Parent Common Stock, the “Merger Consideration”).

 

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(b)    For the purposes of this Agreement, “Excluded Shares” means Company Common Shares owned by Parent, Merger Sub or any other direct or indirect wholly owned Subsidiary of Parent, and in each case, not held on behalf of third parties.

2.2.    Conversion of Company Common Shares. At the Effective Time, as a result of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holder of any limited liability company interest of the Company, all of the Eligible Shares converted into the right to receive the Merger Consideration pursuant to this Article II shall cease to be outstanding, shall be cancelled and shall cease to exist as of the Effective Time, and each certificate formerly representing any of the Eligible Shares (each, a “Certificate”) and each book-entry account formerly representing any non-certificated Eligible Shares (each, a “Book-Entry Share”) shall thereafter represent only the right to receive the Merger Consideration in respect of such Eligible Shares the right, if any, to receive cash in lieu of fractional shares pursuant to Section 3.5 and any dividends or other distributions pursuant to Section 3.3 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 the Company.

2.3.    Cancellation of Excluded Shares. At the Effective Time, as a result of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holder of any limited liability company interest of the Company, each Excluded Share shall cease to be outstanding, shall be cancelled without payment of any consideration therefor and shall cease to exist as of the Effective Time.

2.4    Cancellation of Voting Share. At the Effective Time, as a result of the Merger and without any action on the part of the Company, Parent, Merger Sub or the holder of any limited liability company interest of the Company, the Company voting share representing a limited liability company interest in the Company (the “Company Voting Share”) shall cease to be outstanding, shall be cancelled without payment of any consideration therefor and shall cease to exist as of the Effective Time.

2.5    Certificate of Formation and Limited Liability Company Agreement of the Surviving Entity.

(a)    As of the Effective Time, the Certificate of Formation of Merger Sub in effect immediately prior to the Effective Time shall remain unchanged and shall be the certificate of formation of the Surviving Entity from and after the Effective Time, except that the name of the Surviving Entity shall be “Cheniere Energy Partners LP Holdings, LLC”, and thereafter may be amended as provided therein or by applicable Law, in each case consistent with the obligations set forth in Section 5.9.

(b)    As of the Effective Time, the Limited Liability Company Agreement of Merger Sub as in effect immediately prior to the Effective Time shall remain unchanged and shall be the limited liability company agreement of the Surviving Entity from and after the Effective Time, except that the name of the Surviving Entity shall be “Cheniere Energy Partners LP Holdings, LLC”, and thereafter may be amended as provided therein or by applicable Law, in each case consistent with the obligations set forth in Section 5.9.

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

ARTICLE III

Delivery of Merger Consideration; Procedures for Surrender

3.1.    Exchange Agent. At or prior to the Effective Time, Parent shall deposit or cause to be deposited with an exchange agent selected by Parent with the Company’s prior approval prior to the Closing Date (which

 

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approval shall not be unreasonably conditioned, withheld or delayed) (the “Exchange Agent”), for the benefit of the holders of Eligible Shares, (a) an aggregate number of shares of Parent Common Stock to be issued in uncertificated form or book-entry form comprising the amount required to be delivered by Parent in exchange for the Eligible Shares pursuant to Article II and (b) an aggregate amount of cash comprising the estimated maximum aggregate amount of cash required to be paid in lieu of any fractional shares pursuant to Section 3.5. In addition, Parent shall deposit or cause to be deposited 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 Sh