Opinions Peter Brieger
Inter PipelineIPL.TOTOP PICKNov 25, 2013
Peter BriegerStock price when the opinion was issued
As of Nov 01, 2021. Market Open.
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Will be acquired by Brookfield or Pembina. Final decision mid-June. If you own shares, hold on. An attractive asset for PPL, which she owns, as it expands their footprint.
Fascinating display of a lack of IPL corporate governance. IPL has done everything they can to not engage with Brookfield, but happy to risk 350M of shareholder money in break fees as a bait to get PPL to bid for them. He doesn't understand it. Wouldn't invest in a company that won't negotiate a bona fide offer. Missed expectations in last couple of years.
Why is the lower offer being entertained? Good assets, cyclically depressed. He owns PPL and BIP.UN through BAM, the potential buyers. A merged company is good for PPL. The PPL offer is not superior to the hostile Brookfield offer, but it helps them keep their jobs. The tug-of-war is good financially for shareholders. IPL Board has a fiduciary duty to deliver the most value to shareholders, and this would be the Brookfield offer.
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. This is the third attempt for PPL and IPL to merge. Up to $200M in synergies will be achieved. It would be a decent merger and there is probably more in savings than reported. Wait to see what plays out with the bidding war with Brookfield. Unlock Premium - Try 5i Free
Stockchase Insights
Ryan BushellSell half your large position, because there's a chance Brookfield will increase their hostile takeover bid. But IPL finds a partner for its heartland complex, the Brookfield offer may not be the best option and could collapse. If the deal collapses, their could be pressure on IPL shares. He wouldn't buy IPL now (share price is too high), but consider Gibson Energy instead given its fundamentals.
Whether the offer goes through, BIP.UN are savvy buyers. If the plant gets completed, it will be a big win. There are others in the pipeline space he'd rather own. Not sure the price will move up from where it is now. The yield is down around 2.6%.
In this market, with all the uncertainties and potential frothiness, he wants something that is going to deliver almost 100% certitude long-term dividend growth. Given the structure of its 4 businesses, and its major growth area of taking diluent up to Fort McMurray and then shipping back down the oil sands product, that is where its growth has been. They have wonderful 20 year contracts. Risk to cash flow is minimal. Have increased dividends significantly in the last year or 2 and looking out 5, 10, 15 years they will continue to do so. Looking for a total return of 14% in the next year and has a target price of $28.