Brookfield tries to derail $ 6.9 billion Pembina-Inter pipeline deal
Through Simon Casey, Doug Alexander and Robert Tuttle at 3/6/2021
(Bloomberg) – Brookfield Infrastructure Partners LP has increased its hostile bid for Inter Pipeline Ltd. to C $ 8.4 billion ($ 6.9 billion) as it sought to sever the company’s deal with Pembina Pipeline Corp. fourth pipeline company.
Brookfield Infrastructure announced on Wednesday that it will make a cash and stock offering valued at C $ 19.75 per share, which is a 4.4% premium over Pembina’s all-stock proposal, and present it directly to Inter investors. The offer, which is almost three-quarters in cash, came a day after Pembina made an all-stock offer that is currently worth around C $ 19.25 per share.
Brookfield’s new offer on Inter is the latest twist in a nearly four-month saga for control of the Canadian middleman that owns pipeline infrastructure in Western Canada, connecting oil sands and natural gas producers from the region to domestic and foreign customers. In February, Brookfield made a C $ 7.1 billion offer to buy all of Inter’s outstanding shares, but was rejected by the board of directors, which put together a team to review the options.
Investor attention is now focused on whether Pembina will increase its bid. Inter shares rose nearly 8% to C $ 20.41 by 12:30 p.m. in Toronto, above the value of both offers. Brookfield Infrastructure Partners fell 0.7% to C $ 66.06, while Pembina gained 1.9% to C $ 38.53.
“Pembina must now assess whether the industry logic and asset synergies are sufficient to offset the increased dilution of an increased counter-offer, or to maintain the current offer and let shareholders choose between the two proposals,” said the Tudor Pickering Holt & Co. analysts in a note. .
Brookfield said it was granted access to Inter’s data room last month, performed a due diligence and made several buyout proposals. He said he was “disappointed” by the board’s decision to back Pembina’s “inferior” offer and presented his revised offer directly to Inter Pipeline shareholders.
Inter Pipeline informed Brookfield on Monday afternoon that the company should “urgently submit its best offer” as the company was inclined to accept a competing offer, according to the Brookfield statement.
Brookfield said it responded the same day with its offer of C $ 19.50 per share, consisting of 74% cash and 26% shares, but was told the company had already signed a competing deal.
A spokeswoman for Inter Pipeline said she couldn’t comment immediately but would respond later. Pembina did not immediately respond to an email requesting comment. Brookfield declined to comment further.
“We believe Pembina could increase its bid on Inter Pipeline,” Bloomberg Intelligence analysts Michael Kay and Brandon Barnes said in a report. “Pembina would have more synergies, estimated at C $ 200 million per year, with Inter Pipe than with Brookfield and could probably advocate more for the exploitation of the assets. “
The buyout fight unfolds amid a wave of consolidation among Canadian oil and gas companies as they struggle to cope with an industry plagued by volatile commodity prices, a lack of pipelines to export and regulatory uncertainty, evidenced by US President Joe Biden’s cancellation of Keystone from TC Energy Corp. XL export pipeline project last January.
Whichever company owns Inter Pipeline, it will inherit the Heartland petrochemical complex under construction in Alberta. Inter was looking for a partner to help finance the C $ 4.2 billion construction cost while trying to sign long-term sales contracts for 70% of the plant’s capacity.
Brookfield and its institutional partners intend to revise their previous offering, which was made in February, no later than June 4. Brookfield said it has received all regulatory and antitrust approvals and can close as early as 10 business days from the date of filing the new offering.