iA Capital Comments..G&M Pembina Pipeline Corp.’s (
)
recent share price appreciation positions pushes it “into the driver’s seat” for the acquisition of Inter Pipeline Ltd. (IPL-T), according to iA Capital Markets analyst Elias Foscolos.
“At the moment, we weigh the odds of the transaction as 50 per cent in favour of PPL, 25 per cent in favour of BIP, and 25 per cent that neither succeed,” he said.
In a research note released Thursday, Mr. Foscolos said the next key date in the bidding war comes on June 22 when Brookfield Infrastructure Partners LP’s (
) current offer expires. Though he sees Pembina’s proposal as “superior at this point in time,” he emphasized Brookfield’s next steps remain unclear.
“Given PPL’s current trading price and the superiority of the PPL offer, Brookfield can as a next step choose to extend its offer, increase and extend its offer, or let its offer expire,” he said. If it lets its offer expire, it is highly likely, but not a certainty, that PPL will succeed in acquiring IPL due to the IPL shareholder vote.”
“If Brookfield extends its offer into the date of the shareholder meeting it will create some uncertainty as to the outcome of the vote. BIP could elect to vote against the transaction which would leave some uncertainty as to whether the transaction will be approved. However, if IPL shareholders vote down the transaction, the break fee is payable.”
After a marketing event with Pembina Pipeline on Wednesday, two days after the release of its business update, Mr. Foscolos said “it is clear that the company is committed to executing on its growth opportunities.” He feels Inter Pipeline is central to that strategy and potential upside.
“Volumes across PPL’s Pipelines and Facilities segments have been growing this year, exceeding pre-COVID levels,” he said. “Going forward, Pembina unveiled approximately $7-billion of potential accretive projects in various stages of development to be pursued alone or with IPL. The Company reiterated its partnership with the Haisla Nation to build the Cedar LNG facility as well as its ‘Chinook Pathways’ partnership with the Western Indigenous Pipeline Group (WIPG) to pursue ownership of the Trans Mountain Pipeline. PPL informed the market that combining IPL’s Heartland Petrochemical Complex (HPC) with Pembina’s 60,000 barrels per day of propane supply infrastructure would eliminate long-term supply risk and potentially allow PPL to construct its previously deferred petrochemical facility.”
Maintaining a “hold” rating for its shares, Mr. Foscolos increased his target by $1 to $42. The average on the Street is $39.94.