Inter Pipeline says Brookfield's offer of over $6bn below fair value

Canada's Inter Pipeline Ltd said on Thursday an unsolicited offer of up to C$18.25 per share from its largest shareholder Brookfield Infrastructure Partners did not reflect the true value of the company.

Brookfield, which acquires and manages infrastructure assets, offered C$16.50 per share on Wednesday, a 23% premium to the stock's prior closing price, and said it was willing to raise it to as much as C$18.25 if the pipeline operator gave it access to due diligence.

At the top price, the offer would value Calgary-based Inter at C$7.8 billion ($6.16 billion). Inter said that was not sufficient for it to enter into exclusive talks with the infrastructure firm.

The pipeline operator said Brookfield has not made a formal offer and if it does, the company's board will review it with advisors.

Brookfield said it had first approached Inter in September with offers at premiums as high as 50% to the company's trading price.

Back then, consolidation was the energy industry theme as it reeling under COVID-19 restrictions that hit fuel demand and forced producers to pump lesser crude oil, reducing the need for pipeline capacity.

The talks fell through as Inter had a "more optimistic outlook of future growth" and attached to itself a value that was well over Brookfield's assessment, Brookfield said.

Several analysts sided with Brookfield, saying accepting the offer would be the most likely outcome for Inter.

Brokerage RBC said many shareholders would be unhappy if Inter says no, particularly after it refused another offer two years ago, which had valued it at C$12.4 billion.

Inter Pipeline's shares have fallen nearly 38% over the last one year.