Opinions Christine Poole
Inter PipelineIPL.TOCOMMENTJan 12, 2016
Christine PooleStock 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%.
Are pipelines safe as long-term holds? For the next few years, pipeline cash flows are safe, particularly with this company. Increased the dividend in December by about 6%. It is coming off a strong CapX program from 2014. This means that going forward their cash flow growth will slow, because they do have excess capacity on one of their oil sands pipelines. Because crude prices are declining, there is less pipeline demand. It just means it may take longer for them to fill up that excess capacity. However, what they have flowing through, is really protected through long-term service agreements or pass through agreements, so there is very little price risk. The dividend is safe, but you’ll just see slower dividend increases.