Inter Pipeline accepts Brookfield deal instead of Pembina’s

inter pipeline

Inter Pipeline has accepted the Brookfield Infrastructure Partners deal for acquisition, for nearly $7 billion; which turns the hostile takeover bid into a friendly merger. The news came just a few days after Inter Pipeline terminated the two-month engagement with Pembina.

Firstly, as we reported previously, Inter Pipeline terminated a proposed acquisition by Pembina Pipeline corporation. The value of the transaction was for around $6 billion; and the transaction would have created one of the largest pipeline companies in Canada.

Secondly, the bidding was for Inter Pipeline had Pembina and Brookfield Infrastructure competing to consolidate the Western Canadian oil and gas midstream sector; however, Brookfield was Inter Pipeline’s largest shareholder, consequently, Inter Pipeline’s board ultimately saw greater value on the Brookfield side.

Thirdly, as S&P reports, Brookfield had increased its hostile bid from about $6.75 billion to more than $6.8 billion; higher than Pembina’s all-stock deal of just more than $6.6 billion; however, largely offset by the nearly $280 million breakup penalty now owed to Pembina.

Moreover, the deal with Brookfield was a better offering; it has a quicker closing date and up to 100% cash for Inter shareholders. Previously, Inter Pipeline had considered the acquisition by Pembina to be better, as it offered higher dividend payments; and also, greater synergies and long-term value from combining their Canadian assets to unlock more profits.

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Inter Pipeline concludes Brookfield offer to be better

Nevertheless, Brookfield sweetened its offer, and Pembina opted not to raise its offer. Consequently, Inter Chairwoman Margaret McKenzie, said in a statement on Tuesday. “After thoroughly considering the alternatives, the Inter Board has concluded that the value and flexibility of the Brookfield offer is better for our shareholders.”

In addition, Inter’s board of directors has recommended shareholders support the pending offer made by Brookfield directly to the investors. Inter shareholders can vote through Aug. 6.

Furthermore, according to S&P, the deal with Pembina casted doubts, after top proxy advisory firms Glass Lewis and Institutional Shareholder Services said they favored the Brookfield offer. Therefore, inter voted against the deal with Pembina; and Pembina immediately canceled the deal and agreed to accept its breakup fee.

Finally, Brookfield has extended its offer deadline to August 6, as said above. It has also sweetened its proposal. Now the company needs two-thirds of shareholder support to win the deal.

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