Their presentation looks good. They have been doing this for years, so lets hope they execute it well. I do think that, to finance in this kind of market you have to price it attractively. So now the current shareholders have to hope that the return from the new offer(recapitalisation) will make up for them in the future.
Now my question is, 1. Any one adding to their existing position and at what price, as its a longterm play? 2. Would you prefer BAM or BIP?
I placed an order last night and was fortunate enough to buy in for $15.20 or so. I can't dissect all their different businesses that they are buying, but I think this is a good infrastructure/natural gas play. Goldman is bullish in natural gas right now, for good reason I think.
BIP looks like a great and very real business opportunity. It may take a couple years for the profits to really blossom. It will get there, and I'm looking forward to the results.
I'm not sure what I'll do. I was looking at the shareholder reports and recapitalization plan on the Babcock website. It looks like Babcock produced $730M EBITDA for their 12 mos ended June. The recapitalization plan shows they intend to have $5.5B debt at that time. So that would give an EV/EBITDA of (1.5+5.5)/.73 = 9.6. Not expensiv, but not shoot the lights out cheap either.
There are a few factors that make it cheaper from BIP's point of view:
1. Jun08-Jun09 was a recession year and 2010 EBITDA should be higher. 2. BIP gets a 50% stake in DBCT and an option to buy the other half. 3. BIP gets PD ports for 3 British Pounds, but it has debt at the asset level and is really struggling.
So to adjust for DBCT, forgetting about PD Ports at the moment, I get this:
DBCT 2009 EBITDA 151M. Debt 800M. Roughly.
BABCOCK & BROWN NET OF DBCT: EBITDA, 580M. Debt 4.7B. 40% BIP share of BABCOCK & BROWN ex DBCT EBITDA 232M. Debt 1.9B. 70% BIP share of DBCT EBITDA $105M. Debt 560M.
BIP share of totals EBITDA 337M, Debt 2.5B. BIP equity = 713M EV/EBITDA to BIP: (2.5+.7)/337 = 9.5
In order to make this really pay of to BIP unitholders it seems to me that it is going to take some combination of economic recovery and turnaround at PD Ports.
I'm still considering but I'm leaning to passing on the offering. I don't follow BAM so have no opinion there.