An affiliate of Brookfield Infrastructure Partners LP (Brookfield) has commenced a hostile takeover bid to acquire all of common shares of Inter Pipeline Ltd. not already owned by Brookfield.
The Inter Pipeline Board, based on the unanimous recommendation of the Special Committee comprised of independent directors, has unanimously concluded that the Hostile Bid is inadequate, does not reflect fair and full value for the Common Shares and is not in the best interests of Inter Pipeline or its Shareholders. Therefore, our board recommends that you REJECT the Hostile Bid and DO NOT TENDER your Common Shares.
NO ACTION IS REQUIRED to REJECT the Hostile Bid
6 Reason to take no action on the Hostile Bid from Brookfield
Inter Pipeline Directors’ Circular
We urge you to carefully read the attached Directors’ Circular, which provides the complete background to the Hostile Bid and outlines the full list of compelling reasons to REJECT it. This Hostile Bid:
Is opportunistic and undervalues your shares
Represents a low premium and low multiple
Deprives you of the benefit of the Heartland Petrochemical Complex, which is nearing start-up
Do not tender your shares. Please read on for more reasons why
Reasons to Reject Presentation
We invite you to read the attached Reasons to Reject the Hostile Bid Presentation, which provides an overview of the compelling reasons to REJECT it.
The Future Is Bright;
Learn What Inter Pipeline Management Has To Say About The Heartland Petrochemical Complex
In The News
Inter Pipeline’s Christian Bayle, President and Chief Executive Officer, joined BNN Bloomberg to discuss the status of the Heartland Petrochemical Complex and why the hostile bid takeover bid undervalues the company. Watch the video.
The following news releases have been issued by Inter Pipeline in response to the Hostile Bid.
Supplemental Rights Plan
Inter Pipeline’s Board of Directors has unanimously adopted a limited-purpose supplemental shareholder rights protection plan following a recommendation of the Special Committee of independent directors.
A full copy of the Supplemental Rights Plan is available here. A detailed summary of the Supplemental Rights Plan is set out in Inter Pipeline’s Material Change Report which will be available at www.sedar.com.
Common questions on Inter Pipeline’s Supplemental Rights Plan
As disclosed in the news release, we need it to close a loophole in our existing rights plan. The Supplemental Rights Plan incorporates financial derivatives in order to support and facilitate the Strategic Alternatives Review to maximize shareholder value. Under the new plan, certain financial derivatives, including Brookfield’s total return swaps, are treated as equivalent to beneficial share ownership.
Under the Supplemental Rights Plan Brookfield’s Hostile Bid is a permitted bid. The Supplemental Rights plan only prevents a person, including Brookfield, from acquiring an economic interest in Inter Pipeline of 20% or greater through share purchases or derivative transactions outside of a permitted bid. This is a common provision in most US Shareholder Rights Plans, but is a loophole that remains open in Canadian Shareholder Rights Plans. This technical change in no way prevents any prospective buyer, including Brookfield, from making a bid for the Company.
In February, Brookfield disclosed that it owns an economic interest in Inter Pipeline totaling 19.65%, consisting of 9.75% common share ownership and the remaining 9.9% in the form of cash-settled total return swaps.
This threshold is typical in most Canadian Shareholder Rights Plans as it aligns with the level of ownership at which securities laws require a person seeking to acquire control of a company to make a formal offer to all shareholders. The common intention is to ensure that ALL shareholders are treated fairly in an acquisition of the company and provide the Board with the opportunity to pursue alternatives to maximize shareholder value for ALL shareholders. Maximizing shareholder value can only be achieved by allowing Inter Pipeline to conduct an orderly review of strategic alternatives of the Company, providing all potential counterparties an equal opportunity to successfully complete a transaction.
No, as the news release clearly states, the Supplemental Rights Plan is not intended to deter Brookfield from pursuing its hostile bid, nor any other counterparty from making a bid for Inter Pipeline. The Supplemental Rights Plan is only focused on creating a fair and even playing field for all parties who may be interested in pursuing a transaction with Inter Pipeline.
Shareholders other than Brookfield would have the right to purchase additional common shares at a 75% discount to the prevailing market price. Brookfield would not have this right, and as a result its economic interest in Inter Pipeline would be substantially diluted.
The acquisition by Brookfield of an economic interest of 20% or more through total return swaps or additional share purchases would trigger the Supplemental Rights Plan. However, we believe Brookfield is unlikely to trigger the Supplemental Rights Plan. Nobody in Canada has ever purposely triggered a rights plan because of the significant negative economic ramifications to the triggering person of doing so.
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