Brookfield says it may sweeten Inter bid

Brookfield Infrastructure Partners LP said it's considering “further enhancements” to its hostile takeover bid for Inter Pipeline Ltd., one day after Canadian regulators imposed tougher conditions on the offer.

Toronto-based Brookfield extended its bid to Aug. 6. It must get investors to tender at least 55 per cent of Inter Pipeline's shares in order to succeed, the Alberta Securities Commission ruled on Monday. Shares that Brookfield already owns don't count toward the total.

That's higher than the previous hurdle of 50 per cent plus one, making it harder for Brookfield to derail a friendly offer by Pembina Pipeline Corp. to buy Inter Pipeline for US$6.9 billion in stock.

Inter Pipeline rose 0.8 per cent to close at $20.40 in Toronto. Brookfield Infrastructure rose 0.7 per cent, while Pembina added 0.02 per cent.

The regulator's ruling adds a new twist to the fight over who will control Inter Pipeline, a midstream energy company that owns pipelines in Western Canada's oil region, liquid storage terminals in Europe and a large petrochemical complex in Alberta that's under construction.

In Monday's decision, Alberta's securities regulator also said Brookfield must disclose new details about its use of derivatives called total return swaps. Brookfield used the swaps to acquire a nearly 20 per cent economic interest in Inter Pipeline, without having to disclose its stake in the company before it launched a hostile bid in February.

The ruling throws into question the practice of using derivatives to build an economic position in companies without needing to disclose. Prior to making its first offer, Brookfield acquired about 9.8 per cent of Inter Pipeline's shares — just below the 10 per cent level that would have required disclosure under Canadian rules. The use of swaps allowed Brookfield to raise the size of its economic stake to almost 20 per cent. In Monday's oral ruling, the regulator called the tactic “abusive.”

Inter Pipeline's board rejected Brookfield's advances before securing a friendly offer from Pembina for $19.45 a share, announced June 1. Brookfield raised its offer within days and on June 18 revised it to give Inter Pipeline shareholders the option of $19.50 in cash or about $20 in stock.