INTER PIPELINE Takeover offer - Stocktrades Canada

Hi,
Today I found the below message when I logged into my trading account, and this is related to the IPL shares which I hold @22.25.

I’m offered below options to decide or just leave as it….seek your opinion which is a good option for me because it doesn’t make sense to take their Option1: of trading at CAD 19.50 while the market price is CAD 20.20 today.

Appreciate your guidance to make a right decision.

Re-organization Notice – Amended
Dear client, please be advised that there is a voluntary Tender Offer announced for INTER PIPELINE LTD by Bison Acquisition Corp that may require your action prior to the deadline. Holders have the following options:

Option 1: Cash option – To receive CAD $19.50 for each share of INTER PIPELINE LTD tendered. Subject to proration. Tax Consequences: Disposition

Option 2: Stock option – To receive 0.225 share of Brookfield Infrastructure Corporation Class A Exchangeable Subordinate Voting Shares for each share of INTER PIPELINE LTD tendered. Subject to proration. Tax Consequences: Disposition

Option 3: To receive 0.225 units of class B exchangeable limited partnership units of Exchange LP (“Exchangeable LP Units”) for each share of INTER PIPELINE LTD tendered. Subject to proration.

Option 4: Do Not Participate. (Default Option)

To exercise, please contact an Investment Representative prior to June 22, 2021 (11:00 AM Eastern Time). Thank you for giving this your prompt attention. Yours sincerely, HSBC InvestDirect.

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Asked on June 9, 2021 11:20 am

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Private answer

HI Shail,

There are 2 offers on the table, Brookfield brought this one directly to shareholders as IPL management has voted in favour of the PPL option.

There are many options here but the bottom line is this - do you prefer BIP over PPL? If the answer is no - then do nothing.

If the answer is yes, then you have to ask yourself another questions - Do you think a better offer is coming? If the answer is yes, then once again - you do nothing.

If the answer is no, and like the BIP deal but don't want the shares - then you are correct - Option 1 makes no sense. I'd just sell on the open market @20.20 as its higher than the bid price.

If the answer is no and want the BIPC or BIP.UN shares, than you select Option 2 and 3 accordingly. Even at that though, the market price is $20.20 as you stated and it makes no sense to take BIPC or BIP.UN shares. Why? The value of 0.225 shares of BIPC is $14.26 where as the value of 0.225 shares of BIP.UN is $15.07. In both cases, the value of the IPL shares are much higher. So in this case, you are once again just better off selling IPL on the open market and then turning around and buying the BIP shares.

Example: you own 100 shares of IPL - market value is $2,020.
Option 2: 100*.225 = 22.5 and we'll round up to 23. Value would be 23*69.39 = $1,595
Option 3: 100*.225 = 22.5 and we'll round up to 23. Value would be 23 *66.68 = $1,540

Bottom line - with IPL's price currently where it stands, it really doesn't make sense to participate. You'd be better off selling IPL at current market price and either buying BIP or BIP.UN in which case you'd get more shares for you money as IPL's market value is much higher than the offer. I mean this all changes if BIP's price changes but all things being equal today - I would likely not participate. Then the question becomes do you think a better offer is coming? If not sell and move on.

Of note, I already sold mine in the high $17s because i didn't think a better offer was coming. One did come, but still have no regrets as I had something else i wanted to buy anyway. But its a personal choice on whether you think that will happen. Hope that helps,

Mat

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Posted by Mathieu Litalien

Answered on June 10, 2021 4:57 am

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