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Brookfield Acquires Inter Pipeline for $6.8 Billion After Board Nixes Pembina Deal

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Calgary-based Inter Pipeline Ltd. announced July 27 that its board of directors has recommended shareholders accept a $8.6 billion CAD ($6.8 billion USD) takeover offer from Brookfield Infrastructure Partners LP. Days earlier the board rejected a bid from Pembina Pipeline Corp.  

The recommendation follows consultation with legal and financial advisors and a recommendation of the special committee of independent directors of the board, moving the months-long battle for Canada’s fourth-largest midstream company closer to a resolution.

Brookfield submitted a revised takeover bid on July 19, whereby each Inter Pipeline shareholder will have the ability to elect to receive, per Inter Pipeline share, $20 in cash or 0.25 of a Brookfield Infrastructure Corp. class A exchangeable subordinate voting share (BIPC share), or, solely in the case of eligible Canadian Inter Pipeline shareholders seeking a rollover for tax purposes, 0.25 of an exchangeable security (exchangeable units) to be issued by an indirect subsidiary of Brookfield, subject to proration in respect of the BIPC shares and exchangeable units. 

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This reflects a significant improvement compared with Brookfield’s June 2 offer of either $19.50 in cash or 0.225 of a BIPC share for each Inter Pipeline share, and especially compared with Brookfield’s original offer announced Feb. 10 of either $16.50 in cash or 0.206 of a BIPC share for each Inter Pipeline share. Both of the earlier Brookfield offers were subject to proration in respect of both cash and BIPC shares.  

“To maximize shareholder value, we ran a fair and comprehensive strategic review and as a result Brookfield increased its offer by approximately 21 percent,” said Margaret McKenzie, chair of the Inter Pipeline board and the special committee. “After thoroughly considering the alternatives, the board has concluded that the value and flexibility inherent in the revised Brookfield offer, including the significant cash component of the offer and the option for a potential tax-deferred rollover for certain Canadian shareholders, makes it appropriate to recommend acceptance of the revised Brookfield offer to our shareholders.”  

As previously disclosed, on May 31, Inter Pipeline entered into an agreement for a combination with Pembina, whereby Pembina agreed to exchange 0.5 of a Pembina common share for each issued and outstanding Inter Pipeline share. Subsequent to the filing of the revised Brookfield offer, and after carefully evaluating the new offer, Inter Pipeline advised Pembina that the board would not be reconfirming its recommendation of the Pembina arrangement, and Pembina terminated the deal effective July 25.

It was apparent at the time of termination that the Pembina arrangement was not garnering the requisite support of voting Inter Pipeline shareholders and the special resolution to approve the arrangement would not have passed at the upcoming shareholder meeting.

Inter Pipeline has not entered into any agreement with Brookfield to formally support the revised Brookfield offer or to make or maintain the board’s recommendation, nor has Brookfield requested that Inter Pipeline enter into a support agreement at this time. Inter Pipeline intends to file on SEDAR and mail to its shareholders a second notice of change to its Directors’ Circular confirming the board’s recommendation that shareholders accept the revised Brookfield offer, which notice of change will contain additional information for shareholders to consider in making their decision whether or not to tender to the offer.

Financial and Legal Advisors

Inter Pipeline has retained TD Securities Inc. and the Special Committee has retained J.P. Morgan Securities Canada Inc. as financial advisors. Burnet, Duckworth & Palmer LLP and Dentons Canada LLP are acting as legal advisors to Inter Pipeline and its Board of Directors.

About Inter Pipeline Ltd.

Inter Pipeline is a major petroleum transportation and natural gas liquids processing business based in Calgary, Alberta, Canada. Inter Pipeline owns and operates energy infrastructure assets in Western Canada and is building the Heartland Petrochemical Complex — North America’s first integrated propane dehydrogenation and polypropylene facility. Inter Pipeline is a member of the S&P/TSX 60 Index and its common shares trade on the Toronto Stock Exchange under the symbol IPL. 

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