Thursday’s analyst upgrades and downgrades Brookfield Infrastructure Partners LP (BIP-UN-T -1.17%decrease
, BIP-N) is “putting money where their mouth is” in launching a hostile takeover bid
Loading...
for Inter Pipeline Ltd. (IPL-T), according to Citi analyst Ryan Levine.
On Wednesday after the bell, Brookfield revealed it has offered $16.50 per share for the remaining stake in Inter Pipeline that it does not already own, a 23.13-per-cent premium Wednesday’s close and valuing the Calgary-based company’s equity at $7.08-billion.
“BIP began accumulating interests in IPL in March 2020 during the COVID-19 selloff,” he said. “By market close Wednesday, BIP owned 20 per centof IPL. On the earnings call last week, BIP indicated that it had the intention to acquire at least one of the companies that it made a direct investment in. IPL must have been the deal that BIP was alluding to during the earning call. BIP prefers control deals so may be willing to pay up to gain control (given cost basis in IPL). BIP and BIP-C have rallied recently which gives them an improved currency as well.
“Since 2016 BIP has been investing more in data, communications infrastructure and midstream energy. We have put together a list of material transactions over the last five years to help identify the trend. Midstream investments have started to take up larger market share in the last couple years which signals that BIP thinks these assets are the most attractive long term investments. The company has publicly signaled this as well in recent quarter which suggest that conviction has only been strengthened by recent changes to public and private market prices”
Citing an improved macro economic and business outlook, Mr. Levine raised his target for Brookfield’s U.S.-listed shares to US$54 from US$45, keeping a “neutral” recommendation. The average on the Street is US$57.69, according to Refinitiv data.
In response to Wednesday’s announcement, a pair of equity analysts raised their recommendations for Inter Pipeline.
Credit Suisse analyst Andrew Kuske raised its shares to “neutral” from “underperform” with a $16.50 target, up from $13.50. The average on the Street is $15.06.
CIBC World Markets’ Robert Catellier moved the stock to “outperformer” from “neutral” with a $17 target, rising from $13.50.
Other analysts raising their targets for Inter shares included:
STORY CONTINUES BELOW ADVERTISEMENT
* Canaccord Genuity’s John Bereznicki to $16.50 from $14 with a “hold” rating.
“We believe the de-risking of the Heartland Petrochemical Complex (HPC) could support a higher offer from BIP, which suggests potential upside for current shareholders above the initial $16.50 offer. We nonetheless view the likelihood of a competing offer as low, which suggests the risk that no transaction materializes and IPL continues to progress HPC on its own,” he said.
* RBC’s Robert Kwan to $17 from $15 with a “sector perform” rating.