Brookfield Infrastructure (BIP -0.36%)(BIPC -0.31%) unveiled an offer to take Canadian energy infrastructure operator Inter Pipeline (IPL) private. It's willing to pay at least 16.50 Canadian dollars ($13.03) for each share it doesn't currently own, a 23% premium from the recent closing price. But Brookfield could raise its bid if Inter Pipeline allows it to complete its due diligence.
Brookfield is offering CA$16.50 per share in cash or 0.206 shares of Brookfield Infrastructure Corporation for each share of Inter Pipeline that it doesn't currently own. It's already Inter Pipeline's largest shareholder at a 19.6% interest.
It picked up its initial stake in Inter Pipeline (and several other publicly traded infrastructure companies) during last year's stock market sell-off in hopes it would lead to a larger transaction. Brookfield has tried to negotiate with Inter Pipeline on a privatization transaction, but Inter has declined to engage constructively on a deal.
As Inter Pipeline's largest shareholder, Brookfield Infrastructure believes that it's in its fellow investors' best interest to make its offer known. It hopes that this will spur the company to negotiate on a constructive transaction that could yield an even higher valuation. Brookfield said it could increase its offer to between CA$17.00 to CA$18.25 per share ($13.42 to $14.41) for Inter Pipeline if granted access to certain internal information.
Brookfield has a long history of creating value by completing large-scale transactions. While there's no guarantee it will seal a deal with Inter Pipeline, a merger makes sense considering the increasing challenges midstream companies face in financing their operations amid continued commodity price volatility and climate change concerns. Brookfield's diversification and strong financial profile give it a competitive advantage to create more value out of Inter Pipeline's assets.