Brookfield wins contest for control of Inter Pipeline

Industry: Transportation - Pipeline

Brookfield Infrastructure Partners L.P. (“Brookfield”), together with its institutional partners, has successfully acquired more than two-thirds of the outstanding shares of Inter Pipeline Ltd. (“Inter Pipeline”) pursuant to its unsolicited take-over bid (the “Brookfield Offer”) and is expected to complete a subsequent acquisition transaction to take Inter Pipeline private this fall. The Brookfield Offer, in its final form, values Inter Pipeline at approximately $15 billion on an enterprise value basis.

Brookfield first approached Inter Pipeline to propose taking it private in late November 2020. Confidential discussions did not result in a negotiated transaction, and on Feb. 10, 2021, Brookfield announced that it was taking its offer directly to Inter Pipeline shareholders, initially offering a price of $16.50 in cash or 0.206 of a Brookfield Infrastructure Corporation (“BIPC”) share per common share, and disclosed that it held an almost 20 per cent economic interest in Inter Pipeline comprising a 9.75 per cent share ownership position and cash-settled total return swaps representing a 9.9 per cent economic exposure. Brookfield Infrastructure disclosed that the total return swaps did not give Brookfield any right to vote, or direct or influence the voting, acquisition or disposition of any Inter Pipeline shares.

The Inter Pipeline board, through a special committee composed of all of its independent directors (the “Special Committee”), promptly launched a strategic review and recommended that shareholders not tender to Brookfield’s initial offer. Inter Pipeline also adopted a supplemental shareholder rights plan (the “Supplemental Rights Plan”) that equated economic interests acquired through cash-settled total return swaps and similar derivatives to beneficial ownership of shares for purposes of the 20 per cent trigger under the Supplemental Rights Plan.

Brookfield was ultimately permitted to participate in the strategic review process, which culminated in Inter Pipeline entering into an arrangement agreement with Pembina Pipeline Corporation (“Pembina”) on June 1, 2021 pursuant to which Pembina agreed to acquire Inter Pipeline in consideration for 0.5 of a Pembina common share for every Inter Pipeline common share (the “Pembina Arrangement”).

Brookfield responded to the Pembina Arrangement by increasing its bid to $19.50 in cash or 0.225 of a BIPC share for each Inter Pipeline common share and by making an application to the Alberta Securities Commission (“ASC”) to cease trade the Supplemental Rights Plan and to challenge the $350 million break fee potentially payable to Pembina in connection with the Pembina Arrangement. Inter Pipeline and Pembina filed counter-applications with the ASC challenging the appropriateness of Brookfield’s use and disclosure of total return swaps to acquire its economic interest in Inter Pipeline.

On July 12, 2021, the ASC announced its decision denying Brookfield’s applications and imposing additional conditions on the Brookfield Offer in response to the cross-applications made by Inter Pipeline and Pembina. Brookfield responded by increasing its offer to $20 in cash or 0.250 BIPC shares per common share of Inter Pipeline. Pembina announced that it would not be further increasing the consideration offered under the Pembina Arrangement. As a result, Pembina and Inter Pipeline agreed to terminate the Pembina Arrangement, Inter Pipeline paid the $350 million break fee to Pembina and the Inter Pipeline board issued a recommendation to shareholders that they tender to the revised Brookfield Offer. On Aug. 20, 2021, Brookfield Infrastructure announced that it had taken up the approximately 254 million Inter Pipeline common shares tendered under the Brookfield Offer, representing 65.6 per cent of the common shares not beneficially owned by Brookfield Infrastructure, and that it planned to initiate a Subsequent Acquisition Transaction following the expiry of the Brookfield Offer.

Brookfield’s counsel was led by
Albert Lin,
Keir Hunt.

McCarthy Tétrault LLP supported Brookfield’s counsel with a team led by
Jonathan See,
Scott Bergen,
Hailey Schenker,
and which included
Robert Richardson,
Cameron Belsher,
Jake Irwin,
Alyson Goldman,
Jessica Brown,
Paulina Bogdanova,
Michel Bergeron,
Sarah Chiavarini,
Prateek Gupta,
Daryna Kutsyna,
Connor O'Brien,
John Osler,
Suleiman Semalulu,
Farhiyah Shariff,
Jaclyn Wang (corporate/M&A),
Raj Juneja,
Patrick McCay,
Kabir Jamal,
Anthony Campione,
Emily Leduc Gagné (tax),
Candace Pallone,
Ian Mak,
William Lee,
Christina Grimes (financial services),
Isabel Henkelman,
Laura Alford (real property),
Jonathan Bitran,
Oliver Borgers,
Erin Keogh (competition/antitrust),
Shane D'Souza,
Cassidy Bishop,
Carley Frazer,
Geoff Hall,
Sean Kelly,
Julie-Martine Loranger,
William Main,
Jonathan Nehmetallah,
Kara Smyth (litigation).

Burnet, Duckworth & Palmer LLP advised Inter Pipeline with a team including
Bill Maslechko,
James Kidd,
Alicia Quesnel,
Bronwyn Inkster,
Carolyn Wright,
Jon Ozirny,
Brendan Downey,
Mike Henry,
and advised Inter Pipeline in connection with the ASC proceedings with a team including
Jeff Sharpe,
Paul Chiswell,
Andrew Sunter,
Joanne Luu,
Marlena Bova,
Carly Baker,
Daria Pankratyeva,
with support from
Bill Maslechko,
James Kidd,
Alicia Quesnel,
Bronwyn Inkster.

Dentons Canada LLP advised the Special Committee of Inter Pipeline in connection with the Brookfield Offer and the auction process with a team including
Bill Jenkins,
Jessica Myers,
Bennett Wong,
Brian Kearl,
Patrick Maclean,
and also acted as co-counsel for Inter Pipeline in connection with the ASC proceedings with a team led by
Gordon Tarnowsky,
Rachel Howie,
with support from
Bill Jenkins,
Jessica Myers.

Dentons US LLP advised Inter Pipeline on U.S. aspects of the Brookfield Offer with a team including
Walter Van Dorn,
Ausra Deluard,
Grant Levine.

Blake, Cassels & Graydon LLP represented Pembina with a team including
Chad Schneider,
Jeff Bakker,
Kris Simard,
Michael Barrett (M&A),
Brian Facey,
Cassandra Brown (competition),
Chris Harris (energy),
Dan Jankovic,
Monica Cheng (tax),
David Tupper,
Alyssa Duke,
Ryan Morris,
Vanessa Williams,
Jenna Green (ASC proceedings).



Jonathan See Chad Schneider Keir Hunt Scott Bergen Jake Irwin Jessica Brown Raj Juneja Ian Mak Isabel Henkelman Jonathan Bitran Julie-Martine Loranger Kara Smyth Bronwyn Inkster Andrew Sunter Joanne Luu Gordon Tarnowsky Michael Barrett Cassandra Brown David Tupper Alyssa Duke