Brookfield takes over Prime Infrastructure

Prime Infrastructure’s directors have recommended to their shareholders a takeover offer from Brookfield Infrastructure Partners valuing it at A$1.6bn. Brookfield already owned 40 percent of the former Babcock & Brown satellite as a result of an A$1.8bn recapitalisation in late 2009.

Bermuda-based infrastructure investor Brookfield Infrastructure Partners (BIP) has offered to buy the 60 percent it doesn’t already own in former Babcock & Brown vehicle Prime Infrastructure valuing it at A$1.6 billion (€1.1 billion; $1.4 billion), both companies said in a joint-statement.

The directors of Prime Infrastructure have unanimously approved the proposal, which offers Prime Infrastructure shareholders 0.24 BIP shares for each security they hold, valuing Prime Infrastructure at A$4.60 per share or A$1.6 billion. Prime Infrastructure shareholders can choose to receive cash in lieu of BIP securities up to a limit of 4,000 BIP units per holder.

That should allow smaller shareholders in Prime Infrastructure to exit the company for a cash exit price of A$4.55 per share, both companies said. BIP’s offer represents a premium of 28 percent and 32 percent in relation to the five-day trading day and the 30-day trading day, respectively, average prices of Prime Infrastructure and BIP securities prior to the announcement, the companies added.

Following the announcement, Prime Infrastructure’s share price shot up by 21 percent to A$4.35 per security, its highest gain in a year. The acquisition by BIP will create a global infrastructure company worth over $2.5 billion, the companies stated.

Brookfield originally acquired its 40 percent stake in Prime Infrastructure in late 2009, as part of a A$1.8 billion recapitalisation of the debt-laden former Babcock & Brown satellite, known at the time as Babcock & Brown Infrastructure (BBI). Following the recapitalisation BBI, rebranded as Prime Infrastructure, decreased its leverage from a pre-transaction level of 98 percent to 68 percent.

The recapitalisation also gave Brookfield equity stakes in eight assets including European ports operator Euroports, rail infrastructure business Western Australia, New Zealand’s Powerco and UK ports operator PD Ports, among others.

BIP is 50 percent owned by Brookfield Asset Management and its employees and directors. Besides infrastructure, Brookfield manages property, power generation and other specialty funds, with total assets under management of $90 billion.