By Canadian Press

Brookfield Infrastructure buying Enercare in friendly deal valued at $4.3B

Aug 1, 2018 | 12:37 PM

TORONTO — Brookfield Infrastructure Partners has made a friendly $4.3-billion takeover offer for Enercare Inc., which would provide the Brookfield group with a source of stable revenue from a variety of residential utility services, such as electricity and natural gas for condo and apartment units, water heater rentals for houses and equipment repairs.

“We see attractive opportunities to grow the business and continue to create value, leveraging Brookfield’s significant presence in the utility, home building and multi-residential sectors across Canada and the U.S.,” Brookfield Infrastructure chief executive Sam Pollock said in a statement.

Enercare is Brookfield Infrastructure’s second multi-billion deal in a month, and follows the announcement that it will buy a collection of natural gas processing plans and gathering pipelines for $4.31 billion from Calgary-based Enbridge Inc.

The Enbridge assets will be added to Brookfield’s U.S. gas transmission lines, Australian gas and propane distribution operations, and gas storage operations in Alberta and the United States.

Brookfield Infrastructure is also involved in various district heating and cooling systems, including in Toronto and London, Ont.

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A Brookfield spokeswoman said none of the key executives was available to comment on Wednesday about the Enercare deal but said it would be one of the topics discussed on Thursday when Brookfield Infrastructure holds its second-quarter conference calls with analysts.

Brookfield Infrastructure in one of several publicly traded entities within a Toronto-based group anchored by Brookfield Asset Management Inc., which has investments in a wide range of industries.

“We are excited to be acquiring Enercare, a high-quality business that has established a leadership position in North America,” Pollock said.

In the 12 months ended Dec. 31, Enercare had $1.25 billion of revenue and declared monthly dividends totalling nearly $101.6 million. Net earnings for 2017 were $55.5 million, or $76 million before taxes, according to its financial report.

Enercare also had long-term debts totalling more than $1 billion at the end of 2017, much of it accumulated to finance acquisitions.

Enercare said Wednesday that its board unanimously supports the Brookfield Infrastructure offer, which is worth the equivalent of $29 per share in cash with an option to receive some of the price in equity.

The offer is 53 per cent above Enercare’s closing price at $18.91 on Tuesday, prior to the announcement.

The total deal value includes about US$630 million of debt that Brookfield Infrastructure would assume.

Enercare, based north of Toronto in Markham, Ont., provides electricity, water and gas for condominiums and apartments as well as rental water heaters, furnaces and air conditioners.

It has about 5,100 employees, including contractors, at operations in Canada — largely in Ontario — and the United States.

It has made several acquisitions in recent years, including the Service Experts business in 2016, which operates primarily in the United States. Through Service Experts, Enercare has acquired a number of other U.S. heating, ventilation, air condition and plumbing businesses in 2017 and 2018. 

Jim Pantelidis, chairman of Enercare’s board of directors, said in a joint statement that the offer recognizes the value of the business since its initial public offering in 2002.

“I am confident they will provide opportunity for employees of Enercare and capital to continue growing the business,” Pantelidis said. 

The Brookfield group — known as Brascan for much of its history — has a global footprint and access to enormous pools of capital, both internally and through private partnerships, the fixed-income market and public equity markets. 

For example, Brookfield Infrastructure raised $1.3 billion earlier this year by selling its 27.8 per cent interest in a Chilean electricity transmission business to a Chinese company. Last year, it raised about $1 billion through a sale of partnership units on the public market and to Brookfield Asset Management.

Brookfield Infrastructure is one of four limited partnerships, all registered in Bermuda but controlled by Brookfield Asset Management, that operate in complementary industry segments. The other three LPs are Brookfield Business Partners, Brookfield Property Partners and Brookfield Renewable Partners. 

The Brookfield takeover offer has the unanimous support of Enercare’s board of directors but requires support from at least two-thirds of the votes cast by Enercare shareholders. It also requires court approvals and clearance under Canada’s Competition Act.

Under the agreement with Enercare’s board, Brookfield Infrastructure will have the right to match any unsolicited alternative proposals and could receive a $111 million termination fee if the agreement is cancelled under specific circumstances.

Companies in this story: (TSX:ECI, TSX:BIP.UN, TSX:BAM.A)

The Canadian Press