Brookfield Infrastructure Partners said it intends to acquire Inter Pipeline, a listed Calgary-based petroleum transportation, storage and natural gas liquids processing business. Brookfield, which holds an economic interest of 19.6 percent in the company, is offering to buy the rest of the shares for C$16.50 per unit or about C$4.9 billion. The entire deal is valued at about C$13.5 billion.
BROOKFIELD, NEWS, Feb. 10, 2021 (GLOBE NEWSWIRE) — Brookfield Infrastructure Partners L.P. (NYSE: BIP; TSX: BIP.UN), together with its institutional partners (collectively, “Brookfield Infrastructure”), announces today its intention to pursue a privatization transaction in respect of Inter Pipeline Ltd. (“IPL” or the “Company”), pursuant to which it will offer to acquire all of the outstanding common shares of the Company (“IPL Shares”) not already owned by Brookfield Infrastructure, at a price per IPL Share of C$16.50 (the “Offer”).
Under the terms of the Offer and subject to proration, each IPL shareholder will have the ability to elect to receive, per IPL share, C$16.50 in cash or 0.206 of a Brookfield Infrastructure Corporation (NYSE: BIPC; TSX: BIPC) class A exchangeable share (“BIPC Share”). The share exchange ratio has been calculated based on the closing price of the BIPC Shares on February 10, 2021, the last trading day prior to this announcement. The Offer is fully financed, with a maximum cash consideration of approximately C$4.9 billion (representing 76.2% of the Offer’s total consideration) and a maximum aggregate number of BIPC shares issued of approximately 19 million (representing 23.8% of the Offer’s total consideration).
Financial and Strategic Benefits of the Transaction
Brookfield Infrastructure firmly believes that its Offer is in the best interests of all IPL shareholders and that shareholders should have the opportunity to determine what is best for their investment. Brookfield Infrastructure has a long and successful track record of acquiring large-scale infrastructure companies and believes its Offer is compelling for all IPL shareholders and stakeholders alike for the following key reasons:
Significant Premium to both IPL’s Recent Trading Levels and the Company’s
Analyst Consensus Estimates
23% premium to the closing prices of C$13.40 per IPL Share and C$79.97 per BIPC Share on February 10, 2021, the last trading day prior to announcement of this Offer
28% premium to the 30-day volume-weighted average share prices of C$13.07 per IPL Share and C$84.87 per BIPC Share for the period ended February 10, 2021
10% premium to research analyst forward-looking share price targets, which average C$14.98 per share, as well as a significant premium to the trading levels of IPL’s relevant Canadian midstream comparable companies
Immediate Catalyst to Surface Value in a Security that has Significantly
Underperformed in the Public Equity Markets
Despite a strong recovery in global equity markets and a return of commodity prices to pre-COVID levels, IPL’s share performance and credit profile continues to be strained
IPL has delivered the lowest 1-year and 5-year total shareholder returns among its Canadian energy infrastructure peers
Compelling Valuation and an Opportunity for Immediate Liquidity
Compelling valuation, despite the uncertainty of the timely completion and commercialization of the Heartland Petrochemical Complex (“Heartland”) anticipated by the Company within the next two years
IPL shareholders will have the option to elect to receive all of their consideration in cash, subject to an aggregate limit of approximately C$4.9 billion, representing 76.2% of the Offer’s total consideration
Opportunity to Participate in Brookfield’s Diverse Infrastructure Platform
IPL shareholders have an opportunity to receive an equity interest in a large-scale, global infrastructure company with a long-term track record of delivering compelling returns to shareholders
Brookfield Infrastructure Partners has delivered ~10% annual distribution growth and an 18% annualized total return since inception
Brookfield Infrastructure is Uniquely Positioned to Support IPL Through the Environmental Social & Governance (“ESG”) Focused Transition
Brookfield Infrastructure is one of the largest owners and operators of critical and diverse global infrastructure networks which facilitate the movement and storage of energy, water, freight, passengers and data
Brookfield is a responsible Canadian-headquartered company, and IPL will remain a standalone company based in Calgary
Brookfield Infrastructure recognizes that ESG sentiment among public investors is evolving at an unprecedented pace and we are confident that, as part of a larger, more diversified organization, IPL will benefit from Brookfield’s proven capabilities and stewardship around ESG transition investing
Brookfield Infrastructure is currently the largest investor in IPL with an aggregate economic interest in 84,341,555 IPL Shares, representing approximately 19.65% of the issued and outstanding Shares of IPL on an undiluted basis. Brookfield Infrastructure began to accumulate a position in the Company for investment purposes beginning in March 2020.
This position is comprised of beneficial ownership and control of an aggregate of 41,848,857 IPL Shares, representing approximately 9.75% of the issued and outstanding IPL Shares on an undiluted basis, and in addition, a cash-settled total return swap (the “Total Return Swap”) that provides Brookfield Infrastructure with economic exposure to an aggregate of 42,492,698 IPL Shares. The Total Return Swap affords economic exposure comparable to beneficial ownership but does not give Brookfield Infrastructure any right to vote, or direct or influence the voting, acquisition, or disposition of any IPL Shares.
In September 2020, Brookfield Infrastructure first approached the Company to discuss a collaborative strategic transaction, ultimately leading to the submission of specific indicative privatization proposals to the Company’s Board of Directors in November and December of 2020 based exclusively on publicly available information. The offer prices represented significant premiums in the range of 40% to 50% of IPL’s trading prices at various times during our discussions with the Company and were predicated on Brookfield Infrastructure’s ability to conduct confirmatory due diligence to validate the assumptions underlying its proposed price, in particular regarding Heartland. Each indicative proposal submitted to the Company by Brookfield Infrastructure also contained a “go shop” clause to afford the Company an opportunity to proactively canvass the market for a third party offer at a superior price following definitive agreement.
While subsequent correspondence between Brookfield Infrastructure and the Company was positive in spirit, ultimately the Company declined to engage constructively on a privatization transaction citing a view of intrinsic value far in excess of our assessment, largely driven by a more optimistic outlook of future growth and a recovery of commodity prices in excess of current market expectation. Brookfield Infrastructure believes the Company’s view fails to recognize the capital market realities facing energy-based infrastructure companies now and in the future.
Consequently, as the largest investor in the Company, Brookfield Infrastructure firmly believes it is in the best interest of all shareholders to be made aware of its efforts in this regard and be given the opportunity to opine directly on the Offer and for the Company to establish a process to facilitate its privatization.
Brookfield Infrastructure remains open to engaging directly with the Company on fair and balanced terms. Brookfield Infrastructure has made prior proposals to the Company in good faith, with an objective of receiving access to confirmatory due diligence to support a valuation for the Company above the Offer, indicatively in the range of C$17.00 to C$18.25 per IPL share. Brookfield Infrastructure has made this Offer based exclusively on publicly available information. Any ability for Brookfield Infrastructure to increase the Offer would be predicated on (i) being granted the ability to perform customary confirmatory due diligence, including but not limited to an ability to substantiate credible growth potential and the Company’s publicly outlined timeline and commercialization objectives for Heartland, and (ii) IPL not conditioning our access to diligence on restrictions that would preclude our ability to make any offer directly to shareholders, or otherwise inappropriately limit our strategic alternatives in regard to our current position on an appropriate timeline.
Full details of the Offer will be included in a formal take‐over bid circular to be filed with securities regulatory authorities and mailed to IPL shareholders. Brookfield Infrastructure will request a shareholders’ list from the Company and expects to mail the Offer and take‐over bid circular to IPL shareholders as soon as practical upon receipt of this list. The Offer will be open for acceptance for 105 days following the commencement of the Offer and will constitute a “Permitted Bid” for purposes of IPL’s shareholder rights plan as approved by IPL shareholders on May 7, 2020. The Offer is premised on there being 429,219,175 IPL Shares outstanding, on a fully diluted basis.
The Offer will also be subject to certain conditions of completion, including receipt of all necessary regulatory approvals, customary approval by the TSX and NYSE in relation to the issuance and listing of the additional BIPC Shares contemplated by our Offer, absence of material changes to the business and Brookfield Infrastructure owning not less than 66⅔% of the IPL Shares, calculated on a fully diluted basis, after taking up IPL Shares deposited under the Offer and not withdrawn (in addition to the non-waivable statutory condition that more than 50% of the outstanding IPL Shares, excluding IPL Shares beneficially owned by Brookfield Infrastructure, are deposited under the Offer and not withdrawn). Once the two‐thirds percentage acceptance level is met, Brookfield Infrastructure intends, but will not be required, to take steps to acquire all remaining IPL Shares in accordance with applicable law.
The BIPC Shares included in the Offer are the economic equivalent of units of Brookfield Infrastructure Partners L.P. (“BIP”) and are exchangeable for limited partnership units of BIP on a one for one basis.
Brookfield Infrastructure has engaged BMO Capital Markets and Barclays Capital Canada Inc. to act as joint financial advisors and McCarthy Tétrault LLP to act as its legal advisor in connection with the Offer. Laurel Hill Advisory Group has also been engaged to act as Brookfield Infrastructure’s strategic communications advisor and information agent.
Brookfield Infrastructure Partners is a leading global infrastructure company that owns and operates high-quality, long-life assets in the utilities, transport, midstream and data infrastructure sectors across North and South America, Asia Pacific and Europe. We are focused on assets that generate stable cash flows and require minimal maintenance capital expenditures.
Investors can access its portfolio either through Brookfield Infrastructure Partners L.P. (NYSE: BIP; TSX: BIP.UN), a Bermuda-based limited partnership, or Brookfield Infrastructure Corporation (NYSE, TSX: BIPC), a Canadian corporation. Further information is available at www.brookfield.com/infrastructure.
Brookfield Infrastructure Partners is the flagship listed infrastructure company of Brookfield Asset Management, a global alternative asset manager with approximately US$600 billion of assets under management. For more information, go to www.brookfield.com.