Brookfield Infrastructure Partners LP is once again revising its hostile bid for Inter Pipeline Ltd., raising its overall consideration after losing a legal battle over the takeover earlier this week.
Brookfield is now willing to pay Inter Pipeline shareholders $ 20 per share in cash, up from $ 19.50 per share. Its initial offer in February was worth $ 16.50 per share and included a mix of cash and stocks.
Brookfield also now allows Inter Pipeline investors to take certain shares at a high price instead of cash, offering 0.25 shares of Brookfield Infrastructure Corp. (BIPC) for each Inter Pipeline share. BIPC was formed in 2020 to broaden the company’s investor base and attract investors limited in the types of securities they can hold; its shares are effectively the same as the shares of Brookfield Infrastucture’s LP.
The stock exchange was worth $ 23.85 per Inter Pipeline share based on Wednesday’s closing price, however, BIPC shares fell nearly 5% at the start of Thursday’s session. Brookfield is also only prepared to pay a maximum of 32% of its total purchase price in shares.
Brookfield’s revised offering is his second in a month. In June, the company increased its offer price and also allowed investors to take all the cash. At the time, Brookfield said she would consider increasing her purchase price if she won a legal challenge. The company lost the challenge this week, but still increased its offering.
The Alberta securities watchdog dealt a blow to Brookfield’s dreams of acquiring Inter Pipeline on Monday by changing shareholder voting requirements and denying Brookfield’s request to waive termination fees.
The Alberta Securities Commission ruled in favor of Inter Pipeline and its friendly takeover partner Pembina Pipeline Corp. by increasing the percentage of shares that must be tendered to Brookfield’s hostile takeover bid. Prior to the decision, Brookfield needed the support of a simple majority of Inter Pipeline’s independent shareholders, but will now need the support of 55% under an amended tender condition.
The ASC also denied Brookfield’s request to waive a $ 350 million termination fee that Inter Pipeline agreed to pay Pembina if their friendly takeover is not approved by shareholders. “We were not convinced that Inter Pipeline used inappropriate defensive tactics,” the regulator said in an oral ruling.
ASC’s move follows Brookfield’s demand for the regulator to vote against the $ 350 million termination fee because if Brookfield’s hostile bid is successful, the infrastructure giant would indeed be responsible. . Brookfield pledged to raise its buyback price, which was then worth $ 8.47 billion and was originally slightly higher than Pembina’s by $ 8.3 billion, if the fees were waived.
To counter this, Inter Pipeline filed an argument with the ASC which was supported by Pembina, alleging that Brookfield was using “coercive tactics” to win the battle for control. The two companies focused on Brookfield’s use of securities known as total return swaps that give Brookfield a 9.9% economic interest in Inter Pipeline – but do not give Brookfield control of the votes in this block of actions. These are in addition to Brookfield’s outright ownership of a 9.75 percent interest in Inter Pipeline common stock.
Brookfield touted its 9.9% economic interest through swaps, and Pembina and Inter Pipeline feared that Brookfield had scared off rival bidders and also convinced some shareholders that its hostile bid was difficult to stop because the block of perceived vote is so important.
The CSA agreed. “We find that Brookfield’s use and disclosure of total return swaps was clearly abusive to Inter Pipeline shareholders and the capital markets, and as such contrary to the public interest,” said the regulator in its oral ruling, adding that the limited number of disclosures “hurt Inter Pipeline shareholders and the Inter Pipeline auction process.” A detailed written decision will be released shortly.
With the use of exchanges in a takeover battle being a relatively new issue, the ASC said its powers were limited to a few options, one of which was to take down Brookfield’s bid entirely. Instead, the regulator increased the minimum bidding requirement to 55 percent.
The CSA also demanded more disclosure, asking Brookfield to release the names of its counterparties and the dates of the swap transactions. Brookfield also disclosed more information about the $ 15 million success fee it agreed to pay to Bank of Montreal, which served as both financial advisor and swap counterparty. The required details were made public in a press release describing the latest revised offer.
Due to the revised offer, the vote of Brookfield shareholders has been extended until August 6.Your time is precious. Receive the Top Business Headlines newsletter delivered to your inbox in the morning or evening. register today.