Incitec Pivot Ltd T.IPL

RE:IPL

[Dementedaccount]

sclarda wrote:
 Why would Brookfield want to purchase IPL? To make money of course. Of course there are different ways for them to profit whether they do end up buying IPL or not.  The 80 million shares of IPL they  currently own just went up $320 million overnight.

One possibility is that they complete and sell Heartland. Possible they may have a buyer for it already lined up.  

For arguments sake lets throw around a few numbers.  Brookfield owns 80 million shares of IPL at likely $11 average.  That equals aprox.  $900 million in cost for them.  Lets say they could acquire the aprox.  340 million remaining shares for around $20 or aprox.  $6.8 billion giving them a total cost or aprox.  $7.7 billion to acqure all of IPL. 

Lets say that Brookfield has somebody lined up to buy Heartland. Any company that would want to build a project like Heartland from  scratch is looking at many years of getting all the required approvals, financing and building the project and likely spend more than IPL has done to build one.  Why go through all that hassle and expense when you can buy a nearly completed brand new Heartland and start making $500 million in cashflow within one year.

  It appears to me that a sale price of around  $5 billion would be a good buy for someone for Heartland. So brookfield pays $7.7 billion for all of IPL. They then sell Heartland for $5 billion. That brings their total remaining cost for all of IPLs remaining assets down to $2.7 billion. Lets say they sell the rest of the European storage assets for $700 million. That brings their total cost for the remaining IPL assets down to around  $2 billion.

With a $2 billion in remaining investment Brookfield would own the rest of IPLs existing assets that would still be generating aprox.  $650 million in cashflow per year for a nice 33% return on investment.

At ten times cashflow they could then likely sell off the rest of IPL at $6.5 billion. Subtract the $2 billion in investment and Brookfield could walk away with  a tidy $4.5 billion dollar profit on this deal. 

These guys are no dummies and i dont blame them for trying to take advantage of the current situation for IPL a company that is down because of Covid and the Heartland project that was to bit to big of a bite for IPL to handle.

The problem is that the shareholders of IPL many who have been carrying big losses for year are the ones who have taken the pain of the last few years of the Heartland construction and they should get as much of the gain in selling this company for as much as possible. 

For me personally $20 would be fine as i have only been holding the stock for a couple months and i would rather take a nice return for such a short term investment than wait likely another couple years before Heartland gets going with all the unforseen problems that may occur.   

For those who have been holding for years at much higher shareprices management should try and squeeze every penny out of Brookfield or whomever else may come along in the next while.

No matter what Brookfield says they can smell a lot of future profits in IPL and should  and likely will pay a good price. That way IPL shareholders make some money and Brookfield makes some money.

There is enough here for everybody.

I think you are missing about $6 billion in debt from this analysis.