Takeover Battle May Be Foretaste of Pipeline M&A to Come

If you can’t build a pipeline, you can still buy one.

The battle to acquire Canada’s Inter Pipeline Ltd. could foreshadow a wave of deals as major pipeline companies in North America find it almost impossible to grow by laying new conduits.

Rather than shoulder swelling costs from permitting hiccups, project delays and legal battles that are now typical for proposed pipeline projects, operators and infrastructure funds are pivoting toward M&A.

Giants including Williams Cos. and Dominion Energy Inc. have killed multibillion-dollar projects over the past year or so, while Energy Transfer LP has been ensnared in a long court battel to keep its controversial Dakota Access pipeline operating. One of President Joe Biden’s first acts in office was to block the $9 billion Keystone XL conduit.

“Pipeline companies will increasingly turn to M&A due to a lack of growth” opportunities, Gabriel Moreen, a managing director at Mizuho Securities LLC, said during an interview.

Midstream M&A activity has also received a boost as utilities bow to investor pressure to dump pipeline assets and focus on renewables and their traditional lines of business. Just this week, Kinder Morgan Inc. agreed to buy a natural gas pipeline and storage company from Consolidated Edison Inc. and Crestwood Equity Partners LP for about $1.2 billion.

As for Inter Pipeline, hostile suitor Brookfield Infrastructure Partners LP raised its hostile offer to C$8.4 billion ($6.9 billion) in an effort to sideline a competing bid by Pembina Pipeline Corp. Brookfield said its cash-and-stock offer represented a 4.4% premium to Pembina’s all-stock proposal, based on the target’s June 1 closing price.

©2021 Bloomberg L.P.

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