Recent news of a takeover offer of Inter Pipeline Corp. (TSX:IPL) by Brookfield Infrastructure Partners (TSX:BIP.U) has stoked investor interest in energy infrastructure stocks once again.
It appears that Brookfield has impeccable timing with its acquisition prowess over the years. The company’s business model is built on a foundation of picking up companies at relatively cheap valuations, and increasing the value these companies produce over the long-term via operational efficiency improvements, increasing shareholder value for owners in the Brookfield group of companies.
Pembina Pipeline (TSX:PPL)(NYSE:PBA) is a company that is currently more than double the size of Inter Pipeline, and would likely be a much more difficult target for an acquirer to go after. That said, this is a sector with a limited number of players, and a correspondingly limited amount of capacity. Acquisition interest in this sector should in theory increase the value of all players in the pipeline space.
Personally, I’ve thought Pembina and its peers have been undervalued for some time. This acquisition offer validates such a view for value investors out there. I would encourage all value investors, and in particular those value investors with long-term income needs, to consider companies like Pembina right now that represent excellent long-term value.
The energy infrastructure space is one that seems to have lost its luster among many investors due to its ties to the energy sector, despite solid long-term fundamentals and a business model that is defensive in a world of heightened valuations right now.
Invest wisely, my friends.
