Brookfield Infrastructure (TSX:BIP.UN) Secures Victory After 3 Tries

Canadians have a winning stock to invest in this August. The Brookfield Infrastructure stock will surely reward would-be investors considerably after it successfully won the bid to take over a massive energy infrastructure company.

| More on:

Canadians can learn a thing or two from Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP) that won a hotly contested battle to take over a world-scale energy infrastructure company. Inter Pipeline played hard to get, yet Brookfield managed to seal the deal through sheer perseverance.

Investors with long-term financial goals should adopt a similar attitude. If you know that an investment will pay off handsomely in the future, stay the course and don’t lose sight of your objective.

It took Brookfield two revisions of the original buyout proposal to win over Inter Pipeline shareholders. Pembina Pipeline thought it had the monster deal in the bag until Brookfield put its third bid on the table. After winning the bid, the $20.01 billion company has solidified its position as the best utility stock for investors.

Prized catch

Inter Pipeline is a prized catch because its pipeline infrastructure in Western Canada connects oil and natural gas producers with local and international customers. Brookfield’s primary interest is the oil sands pipelines. Moreover, Inter Pipeline’s Heartland Petrochemical Complex (HPC) in Strathcona County, Alberta is in the final stages of completion. HPC’s revenue potential is massive.

The pipeline operator rejected Brookfield’s $7.1 billion bid in February 2021 because it claimed the offer did not reflect the company’s true value. Pembina came into the picture in early June with a friendly all-stock deal worth $8.3 billion. Inter Pipeline’s Chair Margaret McKenzie said Pembina offered a compelling value for shareholders in the short term.

Brookfield did not waste time and countered a higher $8.48 billion bid (74% cash). Inter Pipeline’s board rejected the offer anew. With the voting date nearing, the persistent suitor did not relent. A higher $8.6 billion hostile offer came next to urge Inter Pipeline shareholders to break the arrangement with Pembina.

The clincher

After reviewing Brookfield’s revised bid, International Shareholders Services (ISS) recommended that Inter Pipeline reject Pembina’s offer. The shareholder advisory firm raised an important point. Although Pembina’s appears to be a sound strategic combination, ISS said Brookfield’s more cash offer provides financing certainty with no regulatory risk. It was a riskless option overall.

Before ISS’s recommendation, Pembina announced it was not raising its bid for Canada’s fourth-largest pipeline company. The end came for Pembina when Inter Pipeline shareholders decided to pursue Brookfield’s higher offer. People were not surprised with the U-turn because the revised offer was too good not to reject this time. Meanwhile, Inter Pipeline will pay Pembina a termination fee of $350 million.

Besides owning 9.75% of Inter Pipeline, Brookfield Infrastructure Partners is the flagship infrastructure company of Brookfield Asset Management. The company didn’t give up and is now a step away from winning the bid officially. Inter Pipeline shareholders have until August 6, 2021, to tender their shares and receive a significant premium.

A desirable option

For would-be investors, Brookfield Infrastructure has become a desirable option. The utility stock trades at $67.72 per share (+9.6% year to date) and pays a 3.75% dividend. Also, it should give you the confidence to invest as most of its operating assets are regulated. As a result of stable cash flows, the dividends should be safe and lasting.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Brookfield Asset Management. The Motley Fool recommends Brookfield Asset Management Inc. CL.A LV, Brookfield Infra Partners LP Units, Brookfield Infrastructure Partners, and PEMBINA PIPELINE CORPORATION.

More on Dividend Stocks

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Where to Invest Your $7,000 TFSA Contribution

The TFSA is attractive for investors who want to generate tax-free passive income.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Dividend Stocks

TFSA Investors: 3 Dividend Stocks Worth Holding Forever

These TSX stocks have the potential to grow their dividends over the next decade, making them top investments for TFSA…

Read more »

Tractor spraying a field of wheat
Dividend Stocks

Is Nutrien Stock a Buy for its Dividend Yield?

Nutrien is down more than 50% form the 2022 highs. Is NTR stock now oversold?

Read more »

golden sunset in crude oil refinery with pipeline system
Dividend Stocks

Best Stock to Buy Right Now: Enbridge vs TC Energy?

Enbridge and TC Energy rebounded nicely over the past year. Are more gains on the way?

Read more »

Electricity transmission towers with orange glowing wires against night sky
Dividend Stocks

2 Utility Stocks That Are Smart Buys for Canadians in November

Are you looking for some of the smart buys to consider in November? These utility stocks offer growth and a…

Read more »

View of high rise corporate buildings in the financial district of Toronto, Canada
Dividend Stocks

Is Power Corporation of Canada Stock a Buy for its 5% Dividend Yield?

Is Power Corporation of Canada (TSX:POW) stock's 5% dividend yield worth it? Discover why this resilient stock could be a…

Read more »

hand stacks coins
Dividend Stocks

Here Are My Top 3 Dividend Stocks to Buy Now

These three dividend stocks are ideal for strengthening your portfolio and earning a stable passive income.

Read more »

man touches brain to show a good idea
Dividend Stocks

3 No-Brainer REIT Stocks to Buy Right Now for Less Than $200

REITs have long been touted as some of the best dividend stocks out there if you want recurring, strong income.…

Read more »