Opinions
Gajan Kulasingam
Inter Pipeline
IPL-T
PARTIAL BUY
Jul 15, 2014
$32.810
Stock price when the opinion was issued
oil pipelines
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DON'T BUY
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.
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HOLD
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.
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PARTIAL SELL
It's trading at a premium to the Brookfield offer, so hold or sell? Whether to sell or hold depends on your individual weighting in your portfolio. If share price drops, will it hurt your portfolio? Maybe sell part of it now, then see if a higher bidder comes, which the market is waiting for.
oil pipelines
HOLD
Pembina and Brookfield are battling over this. Brookfield wants to remove the break-up fee that IPL must pay Pembina, but the regulator let it stand. The bid deadline has been extended to August 6. IPL is trading around the bids of $20. Brookfield Infrastructure may bid higher. Pembina's could be in stock; or you can transition to another energy infrastructure dividend name. Keep holding IPL and let it play out. One of these companies will buy IPL and it could receive a higher bid. Expect a resolution in the next month or two.
oil pipelines
COMMENT
In the midst of a takeover battle from two companies, Pembina and Brookfield An interesting tug-of-war. He sold at the initial offer of $18. Since then, Brookfield has entered the picture to battle Pembina. Pembina is the logical buyer, because there is more synergy. But Brookfield wins on a valuation basis. He doesn't know how this will end, but he expects people to tender in Brookfield's offer. Maybe both companies partially finance and defray the risk. Anything can happen in the coming weeks. He's tempted to tender to the Brookfield offer--the price won't get much better than that.
oil pipelines
An Alberta energy infrastructure operator and a great business. Really a play in the northern Athabascan and Cold Lake regions. Have 3 pipelines. Funded 2 of the pipelines with 2 anchor tenants. The thesis is that they are going to add on incremental shippers with very high, accretive returns. Dividend is sustainable, and will probably grow north of 5%-7% over the next 2-3 years. There continues to be significant CapX put into the space. The only risk would be that they are predominantly in the Alberta pipeline system, and will need to have market access. They can get their pipelines to key Edmonton terminals, and will need to have long haul pipelines out of Edmonton. With a two-year time horizon, you can chip away here. South of $29 would be a good access price, and would give you a 10%-15% margin of error of safety.