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Brookfield Infrastructure Revises Offer to Acquire Inter Pipeline Ltd. to Include 100% Cash Option

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Brookfield Infrastructure Partners L.P. (BIP) has amended its offer to acquire Inter Pipeline Ltd. (IPPLF) and now gives shareholders an option to receive the full consideration of C$19.50 in cash versus a cash and share combination offered earlier.

Per the terms of the revised offer, Inter Pipeline shareholders will have the option to receive C$19.50 in cash, or 0.225 of BIP’s Class A exchangeable shares valued at C$19.99 as of June 17, for each share of Inter Pipeline.

In addition, BIP is prepared to increase the offered bid by up to C$0.901 per share, dependent on the success of its challenge to eliminate or reduce the imposed break fee of $350 million granted by IPL before the Alberta Securities Commission (ASC).

Inter Pipeline will need to pay the break fee if it calls off the friendly, all-share deal by Pembina Pipeline Corp. (PBA).

Furthermore, Brookfield said that its offer has received all the requisite regulatory and anti-trust approvals, is fully funded and has a shorter timeline to closing as it is executable within three business days from the extended expiry date of July 13. (See BIP stock chart on TipRanks)

The company’s management said that, “We believe an all-cash option provides superior value and flexibility for IPL shareholders, as well as enhanced certainty and a clean exit for those institutional and event-driven investors with near-term mandates. Conversely, the all-share consideration included in the Alternative Transaction would result in a substantial and protracted overhang on Pembina’s share price given monetization considerations for event-driven funds, select institutional shareholders and Brookfield Infrastructure’s C$1.6 billion economic interest.”

The ASC has confirmed a hearing date of July 7th for Brookfield Infrastructure’s challenge of the inappropriate terms of the alternate deal between Inter Pipeline and Pembina.

According to the terms of the alternate acquisition deal signed on June 1, Inter Pipeline shareholders will receive 0.5 Pembina shares for each share of Inter Pipeline. Based on the share price of Pembina on May 31, the stock consideration equates to $19.45 per share. The boards of Pembina and Inter Pipeline have unanimously approved the deal.

Brookfield Infrastructure, being the largest shareholder of Inter Pipeline Ltd., will vote against Inter Pipeline’s deal with Pembina.

Credit Suisse analyst Andrew Kuske recently maintained a Hold rating and a price target of $53 (2.1% downside potential) on the stock.

Kuske commented, “Clearly, BIP is well positioned with nearly a 20% ownership position (directly and via swap) at compelling levels. In addition, the stock performance of Brookfield Infrastructure Corporation (BIPC) provides a significant degree of flexibility as does the Brookfield Group’s overall dry-powder.”

Overall, the stock has a Strong Buy consensus rating based on 3 Buys and 1 Hold. The average Brookfield Infrastructure analyst price target of $59.68 implies 10.3% upside potential from current levels.

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