Brookfield Infrastructure Partners L.P. (NYSE: BIP; TSX: BIP.UN),
together with its institutional partners (collectively,
“
Brookfield Infrastructure”, “
we”
or “
our”), is pleased to announce its intention to
file a variation to its offer to acquire IPL, by no later than June
4th 2021, at a price per IPL common share currently valued at
C$19.75 (the “
Offer”)1.
Brookfield Infrastructure is taking its Offer
directly to IPL shareholders. As the largest shareholder, it is
disappointed by the seeming lack of fiduciary responsibility shown
by the decision of the IPL Board of Directors to support an
inferior proposal by Pembina as announced by IPL on June 1, 2021.
Brookfield Infrastructure’s Offer was made privately to the Company
prior to the IPL Board of Directors decision to accept the Pembina
offer. We believe that IPL shareholders will reach a different
conclusion than IPL’s Board of Directors about which transaction is
most compelling to shareholders.
Background to the Offer
IPL Management and the Special Committee
provided Brookfield Infrastructure access to its data room on May
14th. Brookfield Infrastructure carried out confirmatory due
diligence for approximately two weeks and received good cooperation
from IPL Management. Between May 14th and May 31st, Brookfield
Infrastructure held discussions with representatives of IPL and its
Board Chair and submitted several proposals. During these
discussions, Brookfield Infrastructure provided an education
session with the Chair and its advisors around the structure of
BIPC. Brookfield Infrastructure was advised that the session
addressed their questions and that the Board was not discounting
the BIPC Share consideration in its evaluation of our Offer.
In the afternoon of May 31st, Brookfield
Infrastructure was informed that the IPL Board was inclined to
accept a competing proposal and that Brookfield Infrastructure
should urgently submit its best offer.
In describing the merits of our proposal,
Brookfield Infrastructure reiterated its majority cash plus
attractive share consideration and emphasized that we had received
all required regulatory approvals and therefore could close within
weeks with minimal transaction risk. Brookfield Infrastructure
reminded IPL’s representatives that it was a financial investor
and, unlike a strategic investor, would not be seeking to generate
significant cost synergies by eliminating duplicative jobs. The IPL
representatives were also asked whether they were taking into
account the interests of other important stakeholders, particularly
IPL employees, in its evaluation. Suffice it to say, the Board was
aware of all these relevant facts.
On the evening of May 31st, Brookfield
Infrastructure submitted its final offer valued at ~C$19.50 per
share comprised of 74% cash and 26% BIPC shares. That evening we
were informed that the “totality” of the competing offer was
superior, and exclusivity had already been signed.
Upon reviewing the details of the Pembina offer
and the arrangement agreement between IPL and Pembina (the
“Arrangement Agreement”), we fail to understand
why an inferior offer from the perspective of aggregate
consideration, transaction certainty and timeline to completion was
recommended by the IPL Board.
A summary of the competing proposals is
below.
Brookfield Infrastructure’s Offer vs.
IPL’s Alternative Transaction
|
Brookfield Infrastructure’s Offer |
Pembina’s Offer June 1, 2021 |
SHAREHOLDER CONSIDERATIONS |
|
|
|
|
Aggregate consideration (as of close on June 1,
2021) |
C$19.751 |
✓ |
C$18.91 |
X |
Cash consideration |
74% cash |
✓ |
0% cash |
X |
Speed to close |
~20 days |
✓ |
~180 days (Q4 2021) Implied opportunity cost for
shareholders due to delayed closing assuming cost of capital2: 10%
- $0.65 per share |
X |
Certainty of close |
No remaining approvals required |
✓ |
Subject to the following approvals:
● All competition and antitrust regulatory
approvals ● Majority Pembina shareholders ● 662/3% of IPL
shareholders ● Other conditions as disclosed in the Arrangement
Agreement |
X |
OTHER STAKEHOLDERS |
|
|
|
|
IPL Employees |
Financial Investor No employee duplication |
✓ |
Strategic Investor Substantial duplication of
employees, $150-200 million of advertised synergies leading to
significant local job losses |
X |
Anti-Trust Considerations |
No overlapping operations |
✓ |
Significant operational overlap which could impact customer
anti-trust concerns |
X |
|
|
|
|
|
1 Based on assumed 74% cash, 26% share proration.2 Indicative
estimate of time value of money from June 1, 2021 until expected
closing, net of dividends received.
Break Fee
As part of the Arrangement Agreement between IPL
and Pembina, the IPL Board of Directors agreed to a C$350 million
break fee in favor of Pembina when we believe this break fee is
inappropriate as our superior proposal was already on the table.
After reviewing the Arrangement Agreement, it appears that IPL
agreed to an unusually one-sided commercial arrangement in relation
to the break fee to the detriment of all IPL shareholders.
Moreover, the break fee is at the high end of those that are
typically awarded, which is inappropriate in this context. We
believe this is a very improper use of shareholders’ cash and a
decision that requires significant scrutiny.
Detail of the Offer
Under the terms and subject to the conditions of
our intended Offer, each IPL shareholder will have the ability to
elect to receive, per IPL share, consideration of C$19.50 payable
in cash and/or 0.225 of a Brookfield Infrastructure Corporation
(NYSE: BIPC; TSX: BIPC) Class A exchangeable share (“BIPC
Shares”), according to individual shareholder election,
subject to proration with maximum cash consideration of
approximately C$5.6 billion (representing 74% of the total
consideration) and maximum BIPC Shares issued of 23.0 million
aggregate shares (representing 26% of the total consideration),
respectively. The share exchange ratio has been calculated based on
the closing price of the BIPC Shares on May 28, 2021, the last
trading day prior to Brookfield Infrastructure’s proposal presented
privately to IPL’s Special Committee. The Offer also includes an
option for eligible Canadian shareholders to access a tax deferred
rollover in respect of any BIPC Shares received pursuant to the
Offer.
The Offer provides for an enhanced and
attractive value proposition for shareholders, including:
- Aggregate
consideration valued at C$19.75 share1, representing a 47% and 51%
premium to IPL’s closing and 30-day VWAP unaffected share price as
of February 10, 2021, respectively.
- The Offer
is highly certain with the removal of certain previously included
conditions, such as the two-thirds percentage shareholder
acceptance level and the receipt of customary regulatory
approvals.
- In the
event of proration, for those eligible shareholders who elect to
receive 100% of their consideration in BIPC Shares on a
tax-deferred rollover basis, the aforementioned 23.0 million
maximum BIPC Shares issuable under the Offer would be increased up
to an incremental 8 million BIPC Shares (with such incremental
shares priced at the fair market value as of the expiry date of the
Offer, in lieu of cash). This incremental consideration has been
incorporated to ensure every eligible shareholder who may elect to
receive 100% of their consideration in BIPC Shares on a
tax-deferred basis has an ability to maximize the amount of
tax-deferred consideration they seek to receive.
Brookfield Infrastructure encourages IPL
shareholders to read the full details of the Offer to be set forth
in the Notice of Variation, which, together with the Offer to
Purchase and Circular dated February 22, 2021 (the “Offer and
Circular”) will contain the full terms and conditions of the Offer
and other important information, as well as detailed instructions
on how IPL shareholders can tender their IPL shares to the Offer.
Copies of the Notice of Variation, once filed, and the Offer and
Circular will be available without charge on request from the
Information Agent and are available at www.ipl-offer.com or on
SEDAR at www.sedar.com.
Advisors
Brookfield Infrastructure has engaged BMO
Capital Markets and Barclays Capital Canada Inc. to act as joint
financial advisors and McCarthy Tétrault LLP to act as its legal
advisor in connection with the Offer. Laurel Hill Advisory Group
has also been engaged to act as Brookfield Infrastructure’s
strategic communications advisor and information agent.
Shareholder Questions
IPL shareholders who have questions or require
assistance in depositing IPL shares to the Offer should contact the
Information Agent and Depositary, Laurel Hill Advisory Group, by
telephone at 1-877-452-7184 (North American Toll-Free Number) or
416-304-0211 (outside North America) or by email
at assistance@laurelhill.com.
Brookfield
Infrastructure is a leading global infrastructure
company that owns and operates high-quality, long-life assets in
the utilities, transport, midstream and data sectors
across North and South America, Asia
Pacific and Europe. We are focused on assets that have
contracted and regulated revenues that generate predictable and
stable cash flows. Investors can access its portfolio either
through Brookfield Infrastructure Partners L.P. (NYSE: BIP; TSX:
BIP.UN), a Bermuda-based limited partnership, or Brookfield
Infrastructure Corporation (NYSE, TSX: BIPC), a Canadian
corporation. Further information is available
at www.brookfield.com/infrastructure. Brookfield
Infrastructure Partners is the flagship listed infrastructure
company of Brookfield Asset Management, a global alternative asset
manager with over US$600 billion of assets under
management. For more information, go
to www.brookfield.com.
For more information, please contact:
Media: |
Investors: |
Claire Holland |
Kate White |
Senior Vice President, Communications |
Manager, Investor Relations |
Tel: (416) 369-8236 |
Tel: (416) 956-5183 |
Email: claire.holland@brookfield.com |
Email: kate.white@brookfield.com |
No Offer or Solicitation
This news release is for informational purposes only and does
not constitute an offer to buy or sell, or a solicitation of an
offer to sell or buy, any securities. The offer to acquire IPL
securities and to issue securities of Brookfield Infrastructure
Corporation is made solely by, and subject to the terms and
conditions set out in the formal offer to purchase and bid circular
and accompanying letter of transmittal and notice of guaranteed
delivery.Cautionary Statement Regarding Forward-looking
Statements
This news release may contain forward-looking
information within the meaning of Canadian provincial securities
laws and “forward-looking statements” within the meaning of Section
27A of the U.S. Securities Act of 1933, as amended,
Section 21E of the U.S. Securities Exchange Act of 1934,
as amended, “safe harbor” provisions of the United States Private
Securities Litigation Reform Act of 1995 and in any applicable
Canadian securities regulations. The words “believe”, “expect”,
“will” derivatives thereof and other expressions which are
predictions of or indicate future events, trends or prospects and
which do not relate to historical matters, identify the above
mentioned and other forward-looking statements. Forward-looking
statements in this news release include statements regarding the
revised terms and conditions of the Offer, including the implied
value of the consideration under the Offer and the acceptance
period of the Offer; potential further engagement between
Brookfield Infrastructure and the Company, including possibly
varying the terms or conditions of the Offer; information relating
to HPC, including potential cost overruns and the impact on the
project and the Company, EBITDA guidance and possible
reconciliation thereof to ‘long-term’ guidance, contracting terms
and possible operational risk, production guidance and contracting
counterparties and IPL’s approach to segment reporting; and public
market expectations around valuation, statements relating to the
transaction between IPL and Pembina; our intentions regarding IPL,
including its employees; statements relating to Pembina’s possible
intentions in respect of IPL, including its employees.
Although Brookfield Infrastructure believes that
these forward-looking statements and information are based upon
reasonable assumptions and expectations, the reader should not
place undue reliance on them, or any other forward-looking
statements or information in this news release. The actual outcome
of future events could differ from the forward-looking statements
and information herein, which are subject to a number of known and
unknown risks and uncertainties. Factors that could cause actual
events to differ materially from those contemplated or implied by
the statements in this news release include the ability to obtain
regulatory approvals (including approval of the TSX and the NYSE)
and meet other closing conditions to any possible transaction, the
ability to realize financial, operational and other benefits from
the proposed transaction, general economic conditions in the
jurisdictions in which we operate and elsewhere which may impact
the markets for our products and services, the impact of market
conditions on our businesses, the fact that success of Brookfield
Infrastructure is dependent on market demand for an infrastructure
company, which is unknown, the availability of equity and debt
financing for Brookfield Infrastructure, the ability to effectively
complete transactions in the competitive infrastructure space and
to integrate acquisitions into existing operations, changes in
technology which have the potential to disrupt the business and
industries in which we invest, the market conditions of key
commodities, the price, supply or demand for which can have a
significant impact upon the financial and operating performance of
our business and other risks and factors described in other
documents filed by Brookfield Infrastructure with the securities
regulators in Canada and the United States.
Except as required by law, Brookfield Infrastructure undertakes
no obligation to publicly update or revise any forward-looking
statements or information, whether as a result of new information,
future events or otherwise.NOTICE TO SHAREHOLDERS
IN THE UNITED STATES
In connection with the Offer, on February 22,
2021, Brookfield Infrastructure Partners L.P. (“BIP”) and
Brookfield Infrastructure Corporation (“BIPC”) filed with
the U.S. Securities and Exchange Commission (the “SEC”) a
Registration Statement on Form F-4, as amended by Amendment No. 1
thereto filed on April 5, 2021 (the “Registration Statement”),
which contains a prospectus relating to the Offer. SHAREHOLDERS AND
OTHER INTERESTED PARTIES ARE URGED TO READ SUCH REGISTRATION
STATEMENT AND ANY AND ALL OTHER RELEVANT DOCUMENTS FILED OR TO BE
FILED WITH THE SEC IN CONNECTION WITH THE OFFER, AS WELL AS ANY
AMENDMENTS OR SUPPLEMENTS TO ANY SUCH DOCUMENTS, AS EACH BECOMES
AVAILABLE BECAUSE EACH CONTAINS OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE OFFEROR, IPL AND THE OFFER. Materials filed
with the SEC will be available electronically without charge at the
SEC’s website at www.sec.gov and the materials will be posted on
BIP’s website at www.brookfield.com/infrastructure. BIPC is a
foreign private issuer and BIP is permitted to prepare the Offer
and Circular and related documents in accordance with Canadian
disclosure requirements, which are different from those of the
United States. The financial statements included in the Offer and
Circular have been prepared in accordance with International
Financial Reporting Standards as issued by the International
Accounting Standards Board (“IFRS”), and thus may not be comparable
to financial statements of U.S. companies.
Shareholders in the United
States should be aware that the disposition of their Common
Shares and the acquisition of BIPC Shares by them as described in
the Offer and Circular may have tax consequences both in the
United States and in Canada. Shareholders should be aware
that owning BIPC Shares may subject them to tax consequences both
in the United States and in Canada. Such
consequences for Shareholders who are resident in, or citizens
of, the United States may not be described fully in the
Offer and Circular and such Shareholders are encouraged to consult
their tax advisors.
The enforcement by Shareholders of civil
liabilities under U.S. federal securities laws may be
affected adversely by the fact that each of the Offeror, BIP, BIPC
and IPL is formed under the laws of a non-U.S. jurisdiction,
that some or all of their respective officers and directors may
reside outside of the United States, that some or all of the
experts named herein may reside outside of the United
States and that all or a substantial portion of the assets of
the Offeror, BIP, BIPC, IPL and such persons may be located
outside the United States. Shareholders in the United
States may not be able to sue the Offeror, BIP, BIPC or IPL or
their respective officers or directors in a non-U.S. court for
violation of United States federal securities laws. It
may be difficult to compel such parties to subject themselves to
the jurisdiction of a court in the United States or to
enforce a judgment obtained from a court of the United
States.
THE SHARE CONSIDERATION HAS NOT BEEN APPROVED OR
DISAPPROVED BY THE SEC OR ANY U.S. STATE SECURITIES
COMMISSION NOR HAS THE SEC OR ANY U.S. STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF ANY OFFERING
DOCUMENTS INCLUDING THE OFFER AND CIRCULAR. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
In accordance with applicable law, rules and
regulations of the United States, Canada or its
provinces or territories, including Rule 14e-5 under the United
States Securities Exchange Act of 1934, as amended (the “U.S.
Exchange Act”), the Offeror or its affiliates and any advisor,
broker or other person acting as the agent for, or on behalf of, or
in concert with the Offeror or its affiliates, directly or
indirectly, may bid for, make purchases of or make arrangements to
purchase Common Shares or certain related securities outside the
Offer, including purchases in the open market at prevailing prices
or in private transactions at negotiated prices. Such bids,
purchases or arrangements to purchase may be made during the period
of the Offer and through the expiration of the Offer. Any such
purchases will be made in compliance with applicable laws, rules
and regulations. To the extent information about such purchases or
arrangements to purchase is made public in Canada, such
information will be disclosed by means of a press release or other
means reasonably calculated to inform Shareholders in the
United States of such information.The Offer is being made for
the securities of a Canadian company that does not have securities
registered under Section 12 of the U.S. Exchange Act.
Accordingly, the Offer is not subject to Section 14(d) of the U.S.
Exchange Act, or Regulation 14D promulgated by the SEC thereunder,
except for any requirements thereunder applicable to exchange
offers commenced before the effectiveness of the related
registration statement. The Offer is being conducted in accordance
with Section 14(e) of the U.S. Exchange Act and
Regulation 14E promulgated thereunder.
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