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Brookfield Infrastructure (BIP) Offers to Buy Inter Pipeline

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·4 min read
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Brookfield Infrastructure Partners L.P. BIP made an unsolicited offer to acquire all the shares of Inter Pipeline Ltd. (IPL) at C$16.50 ($12.97) per share. Per the terms of the deal, each shareholder will have the option to receive the amount in cash or 0.206 class A exchangeable shares of Brookfield Infrastructure Corporation BIPC.

This exchange ratio is calculated using Brookfield Infrastructure Corporation’s closing price on Feb 10, 2021, the last trading day prior to the above announcement. The deal is fully financed, offering maximum cash price of C$4.9 billion ($3.85 billion), representing 76.2% of the total consideration while maximum 19 million worth Brookfield Infrastructure Corporation’s shares are issued, indicating 23.8% of the total deal value.

Brookfield Infrastructure commenced acquiring an interest in the IPL for investment purposes in March 2020 and currently has an aggregate economic interest in 84.34 million IPL shares, representing 19.65% of the shares.

Will Brookfield Infrastructure Become Lucky 2nd Time?

Brookfield Infrastructurehad earlier made an uncalled-for bid to acquire all the shares of IPL for a price between $17 and $18.25 per share. But IPL had turned the offer down after a comprehensive assessment of the conditional proposals as the board felt that the true intrinsic value wasn’t reflected in the same.

The company again made an offer this time in expectation of its successful completion. Whether the utility will win the deal this time, only time will tell. However, the company might have to face some difficulty in closing the deal as shares of IPL rose 29.3% following the offer.

Why Brookfield Infrastructure is Trying to Acquire IPL

The motive behind the utility’s buyout offering to IPL is the latter’s under-construction project Heartland Petrochemical Complex. In fact management also mentioned that the company was open to negotiations after analyzing the growth prospects and commercialization objectives of the project. Also, IPL is in search of a partner to share the costs of this endeavor. Hence, Brookfield Infrastructure is in a hurry to settle the deal to avoid competition from other bidders.

Other Efforts

Along with strategic buyouts, the company is divesting businesses to boost its operations. Earlier this month, it inked deals to sell 100% of its North American district energy business Enwave, which will be divested through two separate transactions for a total price of $4.1 billion on an enterprise value basis.

Zacks Rank & Price Performance

Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past month, shares of the company have gained 0.9%, outperforming the industry’s rise of 0.3%.

Key Picks

A few better-ranked stocks in the same industry are Korea Electric Power Corporation KEP and National Grid Transco, PLC NGG. While Korea Electric Power sports a Zacks Rank#1, National Grid Transco carries a Zacks Rank#2 (Buy), currently.

Korea Electric Power and National Grid Transco have a long-term (three-five years) earnings growth rate of 5% and 2.7%, respectively.

The Zacks Consensus Estimate for Korea Electric Power’s 2021 earnings has moved 30.5% north in the past 60 days. Also, the Zacks Consensus Estimate for National Grid Transco’s fiscal 2021 earnings has moved 4.1% north in the past 60 days.

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Brookfield Infrastructure Corporation (BIPC) : Free Stock Analysis Report

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