Brookfield Infrastructure Wins Inter Pipeline Takeover Battle
After Pembina Pipeline (NYSE:PBA) cancelled its merger agreement with Inter Pipeline (TSX:IPL), the saga for control of the Canadian energy infrastructure business appears to be finished. Brookfield Infrastructure (NYSE:BIP) (NYSE:BIPC) increased its offer after receiving backing from two important proxy advisors.
Here’s a closer look at the transaction and what Inter Pipeline has to offer.
Since September, Brookfield Infrastructure has been attempting to acquire Inter Pipeline. In early February, it went public with a cash-and-stock offering valued at 16.50 Canadian dollars ($13.13) per share. That was a 23.8 percent increase in price. The business said it may raise its offer to CA$17-CA$18.25 ($13.52-$14.52) per share if Inter Pipeline agreed to provide it with information so it could complete its due diligence.
After rejecting Brookfield’s bid, Inter Pipeline eventually agreed to a merger with Pembina. The company was valued at CA$19.45 ($15.47) per share in the all-stock transaction.
Brookfield, on the other hand, continued to tinker with their offer. Its most recent proposal was for CA$21.23 ($16.89) per share, with investors having the option of accepting all cash, all stock, or a combination of the two. As a result, its bid was 8% higher than Pembina’s. Brookfield has emerged as the winner now that Pembina has cancelled its merger deal, as Pembina has refused to boost its bid.
Inter Pipeline is a corporation that specializes in energy infrastructure in Canada. In western Canada, it runs oil pipelines, processing refineries, and storage terminals. These midstream assets provide consistent cash flow because to long-term fixed-rate contracts. Brookfield, which owns and operates other midstream assets in Western Canada, saw it as a strategic match.
Inter Pipeline is also constructing a large-scale petrochemical plant in western Canada. It plans to finish the project by the end of the year and begin operations in early 2022. About 70% of the company’s expected annual output is covered by long-term take-or-pay contracts. Because of that, it should generate CA$400 million to CA$450 million ($318 million to $358 million) of adjusted EBITDA in 2023 when it’s fully operational, and CA$450 million to CA$500 million ($358 million to $398 million) over the long term. That’s a significant uplift for Inter Pipeline, which generated CA$969 million ($771 million) in adjusted EBITDA last year.
Brookfield will benefit from the consistent cash flows of Inter Pipeline’s existing oil and natural gas liquids (NGL) infrastructure by acquiring it. It will also benefit from the petrochemical project’s upside, which will result in considerable earnings growth over the following five years. Brief News from Washington Newsday.