Post by
retiredcf on Apr 13, 2023 9:15am
CIBC
Have a US$46.00 target. GLTA
EQUITY RESEARCH
April 12, 2023 Flash Research
BROOKFIELD INFRASTRUCTURE
PARTNERS L.P.
Agreement To Acquire Intermodal Container Lessor A Nice Fit
BIP announced a take-private transaction to acquire Triton International for
$85/sh including $68.50/sh cash and $16.50/sh in BIPC shares. This values
the company at $4.7B, and an enterprise value of $13.3B or 8.7x consensus
EBITDA. BIP expects its equity investment to be about $1B at closing,
inclusive of BIPC shares. The price represents a 35% premium to the closing
price of Triton shares, and a 34% premium to the 30-day VWAP. The
transaction is expected to close in Q4/23, subject to customary conditions
including approval by Triton’s shareholders and regulatory approval. The
transaction has been unanimously approved by Triton’s board of directors
and has also received all required approvals from Brookfield Infrastructure. It
is not subject to financing conditions or approval from BIPC shareholders.
Triton is the world’s largest lessor of intermodal freight containers, with a
container fleet of over seven million twenty-foot equivalent units. Operations
consist of acquisition, leasing and re-leasing and subsequent sale of multiple
types of intermodal containers.
We see the acquisition as being on-strategy for BIP, adding a business with
highly contracted cash flows, including high utilization rates and lease terms
of about seven years. This new growth platform fits nicely and should
enhance the service offering within the existing Transport segment.
While the 14.6% going-in yield appears decent (based on 2022 reported
results), we note that Triton’s disclosures show industry trends that are
softening from peak levels, but we expect should still generate a return
comparable to BIP’s prior transactions in the 10% range. The risk is that an
economic slowdown reduces cash flow over the short-term, but longer-term
we see less risk given the fit with the existing assets.
This transaction may seem to run counter to BIP’s investment trends of
Digitalization, Decarbonization, and Deglobalization, however, items being
deglobalized are generally more strategic items such as semiconductors,
rather than bulkier items requiring more intermodal containers (furniture,
clothing, etc.) that will likely be less impacted by deglobalization.
We note BIP’s $1B equity will be almost entirely funded through BIPC
shares, with little impact on available liquidity.