Tender to Brookfield’s Offer and Vote Against the Alternative Transaction
Offer Highlights
- Increased Offer provides superior value to
Inter Pipeline Ltd. (“IPL”) shareholders, representing a premium ofC$1.53 or 8%, on a prorated basis,versusthe proposed transaction (the “Alternative Transaction”) with Pembina Pipeline Corporation (“Pembina”). - Shareholders may elect up to 100% cash consideration totalling
C$20.00 per share of IPL without being subject to proration or 0.250 of a class A exchangeable subordinated voting share ofBrookfield Infrastructure Corporation (“BIPC”) (a “BIPC Share”), subject to proration, valued atC$23.85 per IPL share as of market close onJuly 14 . - Revised Offer continues to provide IPL shareholders a clean exit and value certainty through 100% cash consideration, compared to zero cash consideration in the Alternative Transaction.
- The option to receive BIPC shares provides IPL shareholders access to a globally diversified, best in class infrastructure portfolio that has generated superior shareholder returns.
- Revised Offer has received all key regulatory approvals and offers speed and certainty of closing.
- Brookfield Infrastructure, as IPL’s largest shareholder with 9.75% ownership, reiterates its intention to vote against the Alternative Transaction.
- Take Action ̶ Tender to Brookfield’s Offer and Vote AGAINST the Alternative Transaction.
BROOKFIELD, NEWS,
Reasons to Tender to the Brookfield Infrastructure Offer
- Superior Value: Brookfield Infrastructure’s Offer represents a premium of
C$1.53 or 8% versus the Alternative Transaction, on a prorated basis.
| Brookfield Infrastructure Offer | Alternative | |||||||
| All Cash | All Stock | Proration1 | Transaction2 | |||||
_____________________________
1 Assumes that IPL shareholders select the higher value BIPC Shares resulting in 68% cash and 32% share proration and based on the closing price of the BIPC Shares on the TSX on
2 Based on the closing price of the Pembina common shares on the TSX on
3 Shareholders do not have to elect all cash or all shares, they can select the consideration split that best suits their objectives (subject to the BIPC Share proration).
- Value Certainty and Flexibility of Consideration: IPL shareholders have the ability to elect the form of consideration according to their individual preferences:
- Cash consideration, up to 100%, providing immediate liquidity; and/or
- BIPC Shares (subject to proration)3.
- Speed to Close and Immediate Liquidity: Brookfield has received all key regulatory approvals and can take up and pay for tendered shares within three business days after the Offer expiry time (subject to the modified statutory minimum condition).
- Tax Deferred Consideration: Canadian shareholders can elect a tax deferred rollover, which has been used successfully in several previous Brookfield-led privatizations, into BIPC Shares through the proposed Offer.
- Superior Share Consideration: Brookfield Infrastructure share consideration provides a more attractive total return opportunity for IPL shareholders than Pembina.
- Best-in-class Infrastructure Portfolio: Our platform offers the unique advantage of being able to invest across four key infrastructure sectors, at all points within economic cycles, and across multiple geographies to secure the best risk adjusted returns for our investors.
- Stable and Growing Cash Flows: 95% of Brookfield Infrastructure’s revenue is underpinned by regulated and contractual frameworks driving predictable and growing cash flows.
- 75% of our Adjusted EBITDA is indexed to inflation. This top-line revenue growth, combined with low operating costs and fixed-rate debt drives FFO per unit growth of 3-4% annually.
- 40% of our businesses are positioned to benefit from GDP-related volume increases. These volume increases flow directly to the bottom line – as a result we believe they should drive FFO per unit growth of 1-2% annually.
- Strong Growth Pipeline: We have a strong growth outlook through a combination of organic revenue growth and new investment activity:
$2.3 billion backlog of contracted or regulatory approved growth projects which will be commissioned over the next 1-3 years.- Incremental target deployment of
$1-1.5 billion in new investments annually. - Historically, we have deployed
$2.3 billion on average annually over the past five years in new investments and growth capital expenditures.
- Best-in-class Infrastructure Portfolio: Our platform offers the unique advantage of being able to invest across four key infrastructure sectors, at all points within economic cycles, and across multiple geographies to secure the best risk adjusted returns for our investors.
We expect the combination of the stability of our cash flows and our growth outlook to result in total distribution growth of 5-9% annually.
- Attractive Total Return
Track Record and Outlook: A shareholder’s total return is comprised of both its dividend yield and the change in the per share value relative to the entry price. We are proud of our average annual total return of 19% over a 10-year period, which has significantly outperformed Pembina’s total return of 10% over the same period. Additionally, Brookfield Infrastructure has delivered superior dividend growth to its shareholders over the last 10 years with an annual growth rate of 10%, compared to Pembina’s growth rate of 4% over the same period.
| Brookfield Infrastructure and Pembina Total Return | |||||||||||||||
| Total Return Over Time | Annual Equivalent Total Return | ||||||||||||||
| 1-Year | 3-Year | 5-Year | 10-Year | 1-Year | 3-Year | 5-Year | 10-Year | ||||||||
| BIP (NYSE) | 39% | 75% | 150% | 473% | 39% | 21% | 20% | 19% | |||||||
| BIPC (TSX) | 56% | n.a. | n.a. | n.a. | 56% | n.a. | n.a. | n.a. | |||||||
| PPL (TSX) | 25% | 1% | 32% | 166% | 25% | 0% | 6% | 10% | |||||||
| Brookfield Infrastructure and Pembina Historical Dividend Growth Rate | |||
| BIP (US$/Unit) | Pembina (C$/Sh) | ||
| Last 3 Year | 6% | 3% | |
| Last 5 Year | 7% | 5% | |
| Last 10 Year | 10% | 5% | |
| Since 2009 | 10% | 4% | |
Reasons to Vote Against the Alternative Transaction
- The Alternative transaction represents lower value for shareholders: Based on the current and historical market prices, the Alternative Transaction delivers inferior value to IPL shareholders when compared to Brookfield Infrastructure’s superior revised Offer.
| Brookfield Infrastructure Offer1 | Alternative Transaction2 | Brookfield Offer Premium to Alternative Transaction | ||||
| 7.8% | ||||||
| 30-Day VWAP | 4.9% | |||||
| 60-Day VWAP | 6.1% | |||||
| 90-Day VWAP | 8.7% | |||||
- Zero cash consideration: The Alternative Transaction offers 100% share consideration and therefore no access to immediate liquidity or value certainty for those who would otherwise prefer cash consideration.
- Long and uncertain timeline to closing: The Alternative Transaction requires shareholders and regulatory approvals that are yet to be received, exposing IPL shareholders to significant uncertainty in respect of potential customer complaints and consequently anti-trust approvals that are delayed or denied entirely. Pursuant to the Alternative Transaction’s “hell or high water” provisions, the risk of any punitive regulatory or anti-competition rulings or outcomes will be borne by IPL shareholders due to the proposed all-share consideration.
- Potential for overhang and downward price pressure on the share-based consideration: IPL shareholders may experience prolonged downward pressure on Pembina’s share price as short-term shareholders seek to monetize their shareholding via selling shares in the public market.
- IPL employees: Pembina has publicly indicated
~$150 million of general, administrative and operational synergies, which we fear would inevitably result in significant job losses for local IPL employees.
Background to the Offer Update
Brookfield Infrastructure believes that the all-share Alternative Transaction is unattractive as it unreasonably forces all IPL shareholders to accept an all-share consideration based solely on the Special Committee’s assessment of the future value of Pembina stock. Brookfield Infrastructure does not support the thesis espoused by the Special Committee and we feel shareholders should be given an option for a clean cash exit in order to make our own capital allocation decisions, and believe many other IPL shareholders share this view.
In an effort to initiate a dialogue with IPL and Pembina to rectify this substantial flaw, on
In light of the potential for enhanced value and additional certainty for IPL shareholders that such dialogue could have surfaced, Brookfield Infrastructure respectfully disagrees with the Special Committee’s conclusion. In any event, Brookfield Infrastructure will remain opposed to any Pembina transaction that does not contain a significant cash component and urges all IPL shareholders to vote AGAINST the Alternative Transaction and deposit their shares under the Offer.
Details of the Offer
Under the terms and subject to the conditions of our intended Offer, each IPL shareholder can elect to receive, per IPL share, either
For IPL shareholders seeking to participate in the upside from the integration of IPL into a globally diversified infrastructure company, the Offer will continue to include an option to elect to receive BIPC Shares as consideration and an option for eligible shareholders to access a tax deferred rollover in respect of any BIPC Shares received pursuant to the Offer. The maximum BIPC Share consideration will be 31 million aggregate shares (representing 32% of the total consideration), with eligible shareholders who elect to receive 100% of their consideration in BIPC Shares on a tax-deferred basis having access to an incremental 5 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). There is no cap on the amount of cash consideration available under the Offer and IPL shareholders electing to receive cash will not be subject to proration.
We believe this amendment will provide investors with ultimate flexibility, allowing investors to participate in IPL through shares of BIPC and providing additional value certainty and liquidity to those investors who value a clean exit from the company.
Our Offer, as revised, will be open for acceptance until
Additionally, pursuant to the order of the
Brookfield Infrastructure encourages IPL shareholders to read the full details of the revised Offer to be set forth in the Fourth Notice of Variation, which, together with the original Offer to Purchase and Circular dated
Under applicable TSX rules, the BIPC Share issuance requires the approval of BIPC security holders, as the maximum number of BIPC Shares issuable in connection with the Offer exceeds 25% of the total number of outstanding BIPC Shares. BIPC has relied on the exemption available in section 604(d) of the TSX Company Manual to provide TSX with written evidence that holders of more than 50% of the voting securities of BIPC are familiar with the terms of the Offer and the BIPC Share issuance and are in favor of it, in lieu of a duly called meeting of security holders. The Offer is at arm’s length and the issuance of BIPC Shares is not expected to materially affect control of BIPC.
Shareholder Questions
IPL shareholders who have questions or require assistance in depositing IPL shares to the Offer, IPL shareholders should contact the Information Agent and Depositary,
Additional Disclosure Relating to Total Return Swaps
Pursuant to the ASC Order, the
Advisors
Brookfield Infrastructure has engaged
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
Additional Information Regarding Proxy Solicitation
Brookfield Infrastructure is soliciting proxies through this press release pursuant to an order of the
Brookfield Infrastructure has engaged
In addition to revocation in any other manner permitted by law, a registered IPL shareholder may revoke or change a previously made proxy vote: (a) by accessing the IPL Meeting by following the instructions under the heading "How to Participate at the IPL Shareholders' Meeting" in the Joint Information Circular of IPL and Pembina dated
Brookfield Infrastructure beneficially own and exercise control or direction over 41,848,857 IPL shares. Additionally, Brookfield Infrastructure has economic exposure to an aggregate of 42,492,698 IPL shares pursuant to a cash-settled total return swap. The cash-settled total return swap affords economic exposure to IPL shares, but does not give Brookfield Infrastructure any right to vote, or direct or influence the voting, acquisition, or disposition of any IPL shares.
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
NOTICE TO
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
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
Shareholders of IPL should be aware that owning BIPC Shares may subject them to tax consequences both in
An IPL shareholder’s ability to enforce civil liabilities under
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
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
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
For more information, please contact:
| Media: Senior Vice President, Communications Tel: (416) 369-8236 Email: [email protected] | Investors: Manager, Investor Relations Tel: (416) 956-5183 Email: [email protected] |
| Shareholder Questions / Tendering Assistance: North American Toll-Free: 1-877-452-7184 (+1-416-304-0211 outside Email: [email protected] | |
Appendix A
The following Additional Disclosure is provided by the Offeror in response to an order made on
| (a) | the name of the |
| (b) | the date of the ISDA agreements between Brookfield and the Swap Counterparty in respect of the Total Return Swaps is |
| (c) | pursuant to the Total Return Swaps, the |
| |
| (d) | information concerning Brookfield Infrastructure’s commercial relationship with the Swap Counterparty, similar in nature to that contained in the analyst reports referred to at pages 36-40 of the transcript of the cross-examination of |
| |
| (e) | the Advisory Engagement Letter provides that a |
| Title | Document |
|---|---|
| Download this Press Release |