Speculation about a takeover offer from Brookfield Infrastructure Partners (TSX:BIP.U) to buy out the remaining 80% of Inter Pipeline (TSX:IPL) the company does not own has driven shares of Inter Pipeline nearly 30% higher last Friday.
Brookfield Infrastructure announced the proposed offer at a 23% premium to Inter Pipeline’s closing price on Wednesday. It appears investors are banking on Inter Pipeline being able to achieve a higher takeout price as discussions continue on this front.
Currently, this rapid share price spike has resulted in a yield for Inter Pipeline that has plummeted to 2.8% at the time of writing. As far as dividend yielding companies in the energy infrastructure space go, Inter Pipeline has lost its luster with many investors on this front alone.
However, investors seem to be enticed by this offer, and it appears many investors seem willing to hold onto these shares to take advantage of the yield of Brookfield Infrustructure, which is meaningfully higher. Additionally, this yield appears to be much safer than Inter Pipeline’s, given the broad diversification of cash flows Brookfield Infrastructure provides with its basket of investments.
Right now, I’d suggest investors looking to get into the pipeline space for yield consider Enbridge Inc. (TSX:ENB)(NYSE:ENB) or Pembina Pipeline (TSX:PPL)(NYSE:PBA). These pipelines offer materially higher yields and similarly attractive business models.
For those interested in the takeover offer Brookfield Infrastructure has made, I’d recommend buying shares in the Brookfield subsidiary over Inter Pipeline right now, to avoid risks around the deal potentially falling through.
Invest wisely, my friends.
