Regulator says Brookfield used 'abusive' tactics in hostile bid for Inter Pipeline

Alberta's securities regulator has said Brookfield Infrastructure Partners LP used "abusive" tactics in its attempt to acquire Calgary-based Inter Pipeline Ltd.

An Alberta Securities Commission panel has sided with Inter Pipeline, which alleged that Brookfield failed to properly disclose details around a total return swap it says gave Brookfield a 9.9 per cent economic interest in its company. Brookfield already owned a 9.75 per cent stake in the company outright.

Canadian securities laws require shareholders with more than a 10 per cent stake in a company to disclose their holdings. This "early warning" rule is meant to prevent a company from quietly amassing a large block of shares before launching a takeover bid.

Inter Pipeline argued before the regulator that Brookfield's use of return swaps with its counterparty, Bank of Montreal, could be used to block shareholder approval of its competing takeover deal. Inter Pipeline has struck a friendly all-stock deal to be bought by Pembina Pipeline Corp.

The ASC panel said Brookfield's use and disclosure of the return swaps was abusive to Inter Pipeline shareholders and the capital markets. The panel declined to issue a cease trade order for Brookfield's bid for the pipeline company, but said Brookfield must publicly disclose all the details of the return swaps. Brookfield must also increase the minimum tender of its takeover offer.

Brookfield launched its bid for Inter Pipeline in February. Its offer expires Tuesday at 5 p.m. MT. Inter Pipeline says it continues to believe its deal with Pembina offers greater value for shareholders.