Brookfield Infrastructure Partners L.P. (NYSE: BIP; TSX: BIP.UN),
together with its institutional partners (collectively,
“
Brookfield Infrastructure”) has filed a notice of
variation, change and extension (the "
Notice of
Variation") in respect of the offer commenced on February
22, 2021 (such varied offer, the "
Offer") to
acquire all of the outstanding common shares of IPL.
Response to IPL Press
Release
We note IPL’s press release issued yesterday in
which the IPL Board of Directors (“IPL Board”)
reiterated their support for the arrangement agreement entered into
with Pembina on June 1st in an all-share transaction. We do not
believe that any of the justifications provided by the Company
outweigh the overwhelming factors laid out in our press release of
June 2nd supporting the superiority of our 74%/26% cash/share offer
when compared to the all-share, Alternative Transaction. We also
would note the following omissions from the IPL Board’s
analysis:
- As IPL’s largest shareholder, with
9.75% ownership of IPL shares and a total economic interest in the
Company of 19.65%, we are not supportive of the all-share,
Alternative Transaction and intend to vote against it. In the event
the Alternative Transaction is successful, Brookfield
Infrastructure will become a significant shareholder in Pembina
with up to an approximately C$1.6 billion economic interest
(“Brookfield Block”). Brookfield Infrastructure
does not intend to be a long-term investor in Pembina. The
Brookfield Block, in addition to the shares then held by
event-driven funds and any other institutional shareholders who
lack desire to own shares in Pembina, will therefore create a
substantial and protracted overhang on Pembina’s shares. The IPL
Board and its advisors ought to have considered these obvious
factors in making its determination of the value of the all-share
consideration offered in the Alternative
Transaction.
- The Alternative Transaction will
require a lengthy timeline to closing, accompanied by uncertainty
due to numerous conditions to which the Offer from Brookfield
Infrastructure is not subject. The Alternative Transaction exposes
IPL shareholders’ all-share consideration to a host of risks, which
do not appear to have been appropriately evaluated against our
Offer by the IPL Board. For example, as of June 1st, the required
regulatory and antitrust reviews under the Alternative Transaction
were yet to commence and given the overlap between the two
companies, we see uncertainty in the outcome and timeline of these
reviews. Furthermore, failure to receive certain regulatory
approvals would enable Pembina to terminate the transaction without
an obligation to pay IPL the reverse termination fee. These
considerations, along with typical business environment risks such
as commodity price volatility, changes in interest rates and
potential tax code changes, expose the all-share consideration to
valuation risk due to the protracted closing timeline.
- We find it highly surprising that
the IPL Board would be advocating for an all-share proposal when
feedback from the IPL Special Committee and its advisors, during
our interactions with them, indicated they favoured an all-cash
offer. Were the IPL Board genuinely interested in advocating for
share consideration on behalf of shareholders of IPL, they would be
required to take into account Brookfield Infrastructure’s long
history of generating attractive value for shareholders. The IPL
Board made no inquiries regarding the growth opportunities and
outlook for Brookfield Infrastructure. We have US$2.3 billion of
contracted backlog and are targeting investments of US$2 billion
annually in growth initiatives. With the current favourable
economic backdrop, we are optimistic we can build upon our strong
track record where over the past decade we have been able to grow
our dividend by an average of 10% per annum and have generated
average annual total shareholder returns of 18%.
|
Total Return Over Time |
|
1 Year |
3 Year |
5 Year |
10 Year |
IPL (As of Feb.
10) |
-35% |
-25% |
-9% |
59% |
PPL (TSX) |
18% |
1% |
29% |
163% |
BIPC (TSX) |
55% |
n.a. |
n.a. |
n.a. |
BIP (NYSE) |
39% |
84% |
168% |
485% |
S&P/TSX Composite |
35% |
37% |
65% |
100% |
S&P 500 Index |
40% |
62% |
120% |
292% |
Note: Based on market data as of June 1, 2021,
except where otherwise noted. |
As we stated in our previous press release on June 2, 2021, we
believe IPL’s Board erred in concluding that the Alternative
Transaction is a superior proposal for IPL shareholders. This
error, combined with the highly favourable terms granted by the IPL
Board to Pembina, including an egregious break fee, suggests a
prioritization of defeating the Offer over achieving the best
outcome for all stakeholders. Regardless, by bringing our Offer
forward, IPL shareholders will have the opportunity to decide for
themselves with the benefit of full transparency.
The Notice of Variation and related documents
have been filed with the Canadian securities regulators on SEDAR
under IPL’s profile at www.sedar.com and will be mailed to all IPL
shareholders.
Under the terms and subject to the conditions of
the Offer, as varied by the Notice of Variation, each IPL
shareholder will have the ability to elect to receive, per IPL
share, either C$19.50 in cash or 0.225 of a Brookfield
Infrastructure Corporation (NYSE: BIPC; TSX: BIPC) class A
exchangeable share (“BIPC Share”), subject to
pro-ration with maximum cash consideration of approximately C$5.56
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. IPL shareholders may
elect cash consideration in respect of a portion of their IPL
shares and BIPC Shares in respect of a portion of their IPL shares.
The share exchange ratio has been calculated based on the closing
price of the BIPC Shares on May 28, 2021, consistent with
Brookfield Infrastructure’s final 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.
In the event of pro-ration, for those eligible
shareholders who elect to receive 100% of their consideration in
BIPC Shares on a tax-deferred rollover basis, the 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) 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 receive.
The consideration under the Offer was valued at
C$19.75 per IPL share on June 1, 2021, based on the closing price
of the BIPC Shares on that day, the last trading day prior to
Brookfield Infrastructure’s announcement of its intention to revise
the Offer, and assuming a mix of 74% cash consideration and 26%
BIPC Share consideration due to prorating.
The Offer is open for acceptance until 5:00 p.m.
(Mountain Standard Time) on Tuesday, June 22, 2021.
Offer Details
Pursuant to the Notice of Variation, Change and
Extension, Brookfield Infrastructure has satisfied or waived
certain conditions to the Offer, including receipt of key
regulatory approvals, absence of material changes to IPL’s
business, Brookfield Infrastructure owning not less than 66⅔% of
the IPL Shares, calculated on a fully diluted basis, after taking
up IPL Shares deposited under the Offer and not withdrawn and
confirmation that the IPL shareholder rights plan will not
adversely affect the Offer. The Offer remains subject to the
non-waivable statutory condition that more than 50% of the
outstanding IPL Shares, excluding IPL Shares beneficially owned by
Brookfield Infrastructure, are deposited under the Offer and not
withdrawn.
Brookfield Infrastructure encourages IPL
shareholders to read the full details of the Offer set forth in the
original Offer to Purchase and Circular dated February 22, 2021
(the “Offer and Circular”) and the Notice of
Variation, Change and Extension, which contains 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.
IPL shareholders who have questions or require
assistance in depositing IPL shares to the Offer, IPL shareholders
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.
Copies of the Offer and Circular and the Notice
of Variation, Change and Extension are 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.
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.
No Offer or SolicitationThis
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
will be 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.
NOTICE TO U.S. HOLDERS OF IPL
SHARES
Brookfield Infrastructure intends to
make the offer and sale of the BIPC Shares in the Offer subject to
a registration statement of BIPC and BIP covering such offer and
sale to be filed with the United States Securities and Exchange
Commission (the “SEC”) under the U.S. Securities Act of 1933, as
amended. Such registration statement covering such offer and sale
will include various documents related to such offer and sale.
INVESTORS AND SHAREHOLDERS OF IPL 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
THOSE DOCUMENTS BECOME AVAILABLE, AS WELL AS ANY AMENDMENTS OR
SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN OR WILL
CONTAIN IMPORTANT INFORMATION. You will be able to obtain a free
copy of such registration statement, as well as other relevant
filings regarding BIP and BIPC or such transaction involving the
issuance of the BIPC Shares and the underlying BIP limited
partnership units, at the SEC’s website (www.sec.gov) under the
issuer profiles for BIP and BIPC, or on request without charge from
Brookfield Infrastructure, at 250 Vesey Street, 15th Floor, New
York, New York, 10281-1023 or by telephone at (212)
417-7000.
BIPC is a foreign private issuer and
Brookfield Infrastructure is permitted to prepare the offer to
purchase and takeover bid circular and related documents in
accordance with Canadian disclosure requirements, which are
different from those of the United States. BIPC prepares its
financial statements in accordance with IFRS, and they may not be
directly comparable to financial statements of United States
companies.
Shareholders of IPL should be aware that
owning BIPC Shares may subject them to tax consequences both in the
United States and in Canada. The offer to purchase and takeover bid
circular may not describe these tax consequences fully. IPL
shareholders should read any tax discussion in the offer to
purchase and takeover bid circular, and holders of IPL Shares are
urged to consult their tax advisors.
An IPL shareholder’s ability to enforce
civil liabilities under the United States federal securities laws
may be affected adversely because Brookfield Infrastructure
Corporation is incorporated in British Columbia, Canada, some or
all of Brookfield Infrastructure’s officers and directors and some
or all of the experts named in the offering documents reside
outside of the United States, and a substantial portion of
Brookfield Infrastructure’s assets and of the assets of such
persons are located outside the United States. IPL shareholders in
the United States may not be able to sue Brookfield Infrastructure
or its 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.
NEITHER THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY STATE SECURITIES REGULATOR HAS OR WILL HAVE
APPROVED OR DISAPPROVED THE BIPC SHARES OFFERED IN THE OFFERING
DOCUMENTS, OR HAS OR WILL HAVE DETERMINED IF ANY OFFERING DOCUMENTS
ARE TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
IPL shareholders should be aware that,
during the period of the Offer, Brookfield Infrastructure or its
affiliates, directly or indirectly, may bid for or make purchases
of the securities to be distributed or to be exchanged, or certain
related securities, as permitted by applicable laws or regulations
of Canada or its provinces or territories.
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 of the
Offer; the expected mailing of the Notice of Variation, Change and
Extension; Brookfield Infrastructure’s intentions with respect to
its interest in IPL shares and potential interest in Pembina
shares; statements regarding IPL’s transaction with Pembina;
statements regarding market expectations; statements regarding
trading in Pembina shares; statements regarding expectations
relating to regulatory review; and statements regarding growth
plans and opportunities for Brookfield Infrastructure.
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.For more information, please
contact:
Media:Claire HollandSenior Vice President,
CommunicationsTel: (416) 369-8236 Email:
claire.holland@brookfield.com |
Investors:Kate WhiteManager, Investor Relations
Tel: (416) 956-5183Email: kate.white@brookfield.com |
|
|
Shareholder Questions / Tendering
Assistance:Laurel Hill Advisory GroupNorth American
Toll-Free: 1-877-452-7184 (+1-416-304-0211 outside North
America)Email: assistance@laurelhill.com |
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