Business Acquisitions and Combinations

Acquisition of Teekay Shipping Spain S.L., formerly Naviera F. Tapias S.A.

On April 30, 2004, we acquired all of the outstanding shares of Naviera F. Tapias S.A. and renamed it Teekay Shipping Spain S.L. (or Teekay Spain). Teekay Spain is the leading independent owner and operator of LNG carriers and crude oil tankers in Spain. We also entered into an agreement with an entity controlled by the former controlling shareholder of Teekay Spain to establish a 50/50 joint venture that will pursue new business in the oil and gas shipping sectors that relate only to the Spanish market or are led by Spanish entities or entities controlled by a Spanish Company. The acquisition of Teekay Spain has provided us with a platform from which to expand our presence in the high growth LNG shipping sector and positions us as a key supplier of LNG shipping to Spain, the world’s third largest importer of LNG. We funded this acquisition with a combination of cash, cash generated from operations and borrowings under existing credit facilities.

As at December 31, 2004, Teekay Spain’s LNG fleet consisted of four vessels, which are all contracted under long-term fixed-rate charters to major Spanish energy companies. As at December 31, 2004, Teekay Spain’s conventional crude oil tanker fleet consisted of five Suezmax tankers, and two newbuildings scheduled for delivery in 2005. Four Suezmax tankers and one newbuilding are contracted under long-term fixed-rate charters with a major Spanish oil company. We sold the Suezmax tanker newbuilding not contracted under a long-term fixed-rate charter upon its delivery in March 2005.

Acquisition of 50% of PetroTrans Holdings Ltd.

On September 30, 2003, we acquired 50% of the issued and outstanding shares of PetroTrans Holdings Ltd., the parent company of Skaugen PetroTrans Inc. (or SPT).

SPT is a lightering company operating out of Houston, Texas. Lightering is the process of ship-to-ship transfer of oil cargo, which is required when vessels transporting oil are too large to enter ports that are not deep enough or have narrow entrances or small berths. The lightering process consists of maneuvering a smaller tanker (service vessel) alongside the larger tanker, typically with both vessels underway. The service vessel transports the oil cargo to the port. SPT lighters approximately 14% of all seaborne crude oil delivered to U.S. ports.

Acquisition of Navion AS

In April 2003, we completed our acquisition of 100% of the issued and outstanding shares of Navion AS. Navion, based in Stavanger, Norway, operates primarily in the shuttle tanker and the conventional crude oil and product tanker markets. Its modern shuttle tanker fleet, which as of December 31, 2004, consisted of eight owned and 12 chartered-in vessels (excluding six vessels chartered-in from our shuttle tanker subsidiary, Ugland Nordic Shipping AS, and our other subsidiaries), provides logistical services to the Norwegian state-owned oil company, Statoil ASA, and other oil companies in the North Sea under fixed-rate, long-term contracts of affreightment. Subsequent to the acquisition, the operations of UNS and the shuttle tanker operations of Navion were combined into one business unit, Teekay Navion Shuttle Tankers. Navion’s modern, chartered-in, conventional tanker fleet, which as of December 31, 2004, consisted of 12 crude oil tankers and 16 product tankers, operates primarily in the Atlantic region, providing services to Statoil and other oil companies. In addition, Navion owns two floating storage and off-take vessels currently trading as conventional crude oil tankers in the Atlantic region, one chartered-in methanol carrier and one liquid petroleum gas carrier on long-term charter to Statoil. Through Navion Chartering AS, an entity owned jointly with Statoil, Navion has a right of first refusal on Statoil’s oil transportation requirements at the prevailing market rate until December 31, 2007. In addition to tanker operations, Navion also assembles, installs, operates and leases equipment that reduces volatile organic compound emissions during loading, transportation and storage of oil and oil products.

Additional information about these acquisitions, including our financing of them, is included in Item 5 – Operating and Financial Review and Prospects.