Summer Sale
50% off Premium Yearly
Opinions Patrick Horan
Inter PipelineIPL.TODON'T BUYJul 20, 2015
Patrick HoranStock price when the opinion was issued
As of Nov 01, 2021. Market Open.
You might be interested:
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%.
He is Short this stock. He is also Short Enbridge (ENB-T) and would not be enthusiastic for any other midstream pipeline company. A very expensive stock, trading at 27X earnings. Over the past 4 years, earnings have not mattered; it has been dividends that have mattered. This company has done a wonderful job of raising dividends, raising capital and reinvesting, but have done it in a very low interest rate environment. As interest rates go up, the leverage that they have in that earnings stream and on the balance sheet is going to start to affect earnings.