Brookfield says more deals in the works
$400 million earmarked from Transelect sale
TORONTO • Brookfield is on a buying spree, with more deals close to being finalized on the heels of this week’s $4.3 billion purchase of Enercare Inc. by Brookfield Infrastructure Partners.
Sam Pollock, chief executive of Brookfield’s infrastructure investment arm, told analysts on a conference call Thursday that BIP has another $400 million earmarked for transactions in the final stages of due diligence.
If finalized, these deals would reinvest the remainder of funds received from last year’s sale of a 27.8 per cent stake in the parent company of Transelect SA, Chile’s main electricity provider. “We are now well on our way to redeploying the proceeds into higher returning investments,” Pollock said on the conference call to discuss quarterly earnings. “In that regard, our US$1.7 billion of committed and advanced initiatives should be fully deployed over the next 12 months.”
Brookfield Infrastructure is contributing about US$630 million to the purchase of Enercare; it is part of a US$1.3 billion commitment to three recent deals in the energy and data infrastructure sectors.
Another US$540 million was committed to the US$3.3 billion purchase of western Canadian natural gas gathering and processing assets from Enbridge Inc., announced last month. Brookfield Infrastructure’s institutional partners fund the balance of the investments.
The third deal to redeploy the Transelect proceeds, also in one of the infrastructure group’s targeted sectors, took place in June when AT&T agreed to transfer data centre co-location operations and assets to Brookfield. On Thursday, Pollock said the new investments should generate “substantially higher same-store growth over time than we would have earned in Transelect.”
He said Brookfield Infrastructure Partners has clinched some of the recent deals because fewer buyers are willing to wade into the “additional complexity” of transactions where assets are being separated from a larger company.
“Many financial investors do not have this capability or interest,” he said.
Brookfield Infrastructure is also in a position to provide capital and management attention to businesses that may have been considered non-core, paving the way for additional upside, he added.
Additional opportunities for the newly acquired businesses could come through a number of assets owned or operated by Brookfield Asset Management, analysts were told.
BAM, which operates a number of public and private investment vehicles and has interests in real estate as well as energy and infrastructure, has itself been an active deal-maker recently.
This week, BAM announced plans to acquire Forest City Realty Trust Inc. in a deal valued at US$11.4 billion including debt. That followed last October’s deal to purchase Toronto’s downtown Sheraton Hotel for $335 million.
Other affiliates have also been active. In June, for example, Brookfield Renewable and its partners increased their exposure to solar and wind energy by boosting a stake in TerraForm Power, where Brookfield first became a “cornerstone investor” in March of 2017.
On Thursday’s conference call, Pollock said Brookfield has a positive outlook for the global economy despite threats of a prolonged trade war.
“We believe our business is, for the most part, insulated given our predominantly regulated and contracted cash flow stream,” he said, adding that Brookfield also benefits from diversification and a strong balance sheet.