Benzinga | Jun 10, 2021 07:16AM EDT

Brookfield Infrastructure Files Application With Alberta Securities Commission Seeking Elimination Of $350M Termination Fee Agreed To By Inter Pipeline

Brookfield Infrastructure Partners L.P. (NYSE:BIP, TSX:BIP), together with its institutional partners (collectively, "Brookfield Infrastructure") has filed an application with the Alberta Securities Commission (the "ASC") challenging the defensive tactics inappropriately employed by Inter Pipeline Ltd. (TSX:IPL) ("IPL") and the special committee of its board of directors.



Our application seeks, on behalf of all IPL shareholders, the elimination of the $350 million termination fee (the "Break Fee"), agreed to by IPL and its board of directors, which threatens to enrich Pembina Pipeline Corporation ("Pembina") at the expense of IPL's existing shareholders. This Break Fee was agreed in the face of a clearly superior proposal submitted by Brookfield Infrastructure to IPL's special committee on May 31, 2021 (the "Enhanced Brookfield Proposal"). The superiority of the Enhanced Brookfield Proposal, combined with the questionable basis for agreeing to the Break Fee, are two of the many reasons why the Break Fee should not be allowed to stand. If successful in eliminating or otherwise reducing the Break Fee, Brookfield Infrastructure will further increase our offer to IPL shareholders by an equivalent amount.

The Enhanced Brookfield Proposal offers IPL shareholders a choice between $19.50 in cash and 0.225 of a class A exchangeable subordinate voting share (a "BIPC Share") of Brookfield Infrastructure Corporation ("BIPC")1. As we have previously stated, we believe IPL's board of directors erred in not recognizing the Enhanced Brookfield Proposal to be a superior proposal to all of IPL's other available alternatives. The Enhanced Brookfield Proposal was:

* Higher than the $19.45 announced value of the transaction entered into with Pembina,

* Clearly subject to significantly less conditionality,

* Highly actionable as evidenced by Brookfield Infrastructure's immediate amendment of its offer to IPL shareholders, and

* Clearly superior in composition, with a significant cash component versus the all-share Pembina alternative.

1 Based on the TSX closing price of the BIPC Shares on May28, 2021.

In its application, Brookfield Infrastructure is seeking either (i) an order restraining the payment of the Break Fee, or (ii) a cease trade order, in each case in respect of the proposed acquisition of IPL by Pembina pursuant to an arrangement agreement (the "Arrangement Agreement") announced by IPL and Pembina on June 1, 2021. Brookfield Infrastructure is also seeking an order from the ASC cease trading the two shareholders' rights plans currently maintained by IPL (the "IPL Rights Plans"), one of which was adopted as a tactical response to Brookfield Infrastructure's offer to IPL shareholders on February 22, 2021. Our position is that:

* IPL and its special committee have engaged in conduct that is contrary to the public interest.

* In entering into the Arrangement Agreement, IPL agreed to the Break Fee, the quantum and payment triggers of which are both excessive and completely unwarranted in a circumstance where IPL's special committee chose to accept the lower-priced and less certain proposal available to IPL shareholders at the time.

* As a result, IPL's board has deprived IPL shareholders of potential additional consideration, because Brookfield Infrastructure would be forced to accept that a C$350 million payment will be made to Pembina under the Arrangement Agreement before we are able to offer any additional consideration to IPL shareholders.

* If we are successful in the application, Brookfield Infrastructure will increase its offer to IPL shareholders in an amount equal to the reduction of the Break Fee to the degree it is ultimately reduced or eliminated.

Additionally, Brookfield Infrastructure submits that the IPL Rights Plans have served whatever limited purpose they originally had. With IPL's execution of the Arrangement Agreement, there is no valid purpose for the IPL Rights Plans to continue to interfere in Brookfield Infrastructure's rights under the take-over bid regime in Canada.

Brookfield Infrastructure Reiterates the Highlights of its Superior Offer

* Cash component of offer totalling $5.56 billion representing 74% of the total consideration, compared to zero cash under the Pembina offer.

* Brookfield Infrastructure has received all regulatory and anti-trust approvals and can close as early as June 22nd compared to the alternative transaction which is subject to competition, regulatory and IPL shareholder approvals. As IPL's largest shareholder, we remain unsupportive of the all-share Pembina transaction and intend to vote against it.

* Preserves significant jobs for IPL's employees compared to the alternative cost synergy driven transaction entered into by IPL.

Brookfield Infrastructure believes the choice for shareholders is clear; waiting six months for a Pembina transaction that may not occur due to a high degree of uncertainty surrounding regulatory and shareholder approvals versus the Brookfield Offer that provides a high degree of certainty, a clean exit for IPL shareholders and an opportunity to participate in the growth of a high-quality global infrastructure business.