Inter Pipeline (TSX:IPL) Faces Hostile Takeover By Brookfield (BIP.UN)

Brookfield Infrastructure Partners LP (TSX:BIP.UN) has decided to launch a hostile takeover worth C$ 13.5 billion for energy distributing company Inter Pipeline Ltd (TSX:IPL), of which the former is currently the biggest shareholder.

In an attempt to take it private, Brookfield made a direct offer of C$ 16.5 per share to Inter Pipeline’s remaining shareholders on Wednesday, February 10.

Following the announcement, Brookfield Infrastructure’s stock price dip by about one per cent on Wednesday, while Inter Pipeline scrips traded flat.

Responding to Brookfield’s unsolicited bid, Inter Pipeline released a statement early on Thursday, February 11, urging its shareholders to not take any action at the moment.

Brookfield Infrastructure’s Hostile Takeover Bid For Inter Pipeline – Key Highlights

As per Brookfield Infrastructure’s proposal, Inter Pipeline shareholders have been offered an option to choose between a cash payment of C$ 16.5 or 0.206 of a Brookfield Infrastructure share in exchange of each IPL share they hold.

The share exchange ratio was decided on the basis of Brookfield’s closing price of C$ 66.79 on Wednesday.

Brookfield’s offer reflects a 23 per cent premium over Inter Pipeline’s closing price of C$ 13.4 on Wednesday and a 28 per cent premium over its one-month volume-weighted average stock price of C$ 13.07.

The price, according to Brookfield, is also a premium over the stock value targets  that some market analysts have estimated for Inter Pipeline stock.

In its latest statement, Brookfield described Inter Pipeline’s recent stock performance and credit profile as “strained”.

What Is Inter Pipeline’s Response To Brookfield’s Hostile Takeover Bid?

Toronto-headquartered Brookfield Infrastructure has claimed that it reached out to Inter Pipeline’s board of directors with buyout offers on multiple occasions last year. The talks, however, never bore fruit.

In response, Inter Pipeline issued a statement on Thursday saying that it never received a formal offer from Brookfield. What it got was “unsolicited, non-binding and conditional proposals” quoting offers in the range of C$ 17 to C$ 18.25 per share, the company said.

The Calgary-based company added keeping its shareholders’ “best interests” in mind, its board of directors evaluated the proposals and decided to turn down Brookfield’s offer.

Inter Pipeline also requested its investors to wait until Brookfield makes a formal offer. If and when that is made, the energy distributor said that it will first evaluate the offer and then make a formal recommendation to its shareholders accordingly.