Brookfield Infrastructure Partners L.P. (BIP) has entered into an agreement with an undisclosed buyer to sale its interest in the U.S. Pacific Northwest timberland operations. The total deal value was $790 million. This transaction will help the partnership to generate $470 million, after paying a debt of roughly $320 million. The divesture is expected to close in Jul 2013.
It is evident from Brookfield Infrastructure’s activities that the partnership strongly follows strong timber assets divestment strategy. On Jun 7, 2013, the partnership completed the sale of the remainder of its Canadian BC Coastal timberland operations. Brookfield Infrastructure generated net proceeds of approximately $170 million from this deal.
With the present divesture, Brookfield Infrastructure has sold its entire timberland assets primarily due to lower-than-expected return. In first-quarter 2013, timber segment reported net income and funds from operations of $6 million and $11 million, respectively.
We appreciate Brookfield Infrastructure’s strategy to sale its lower yielding assets and deploy the funds out of those transactions to profitable ventures. As the partnership currently has wide array of investment prospects, it intends to reinvest the net proceeds from these transactions in the scheduled projects.
In 2012, Brookfield Infrastructure acquired an additional interest in Chilean toll road and in the largest toll road operator in Brazil. These transactions will enable the partnership to reposition its assets, which will in turn, strengthen its energy, transport and utilities portfolio.
In addition, Brookfield Infrastructure also intends to utilize the funds to maximize shareholders’ wealth with pre-planned after-tax return on equity of 12% to 15% per annum.
Toronto, Canada-based Brookfield Infrastructure is primarily engaged in the ownership and operation of premier utilities, transport and energy, and timber assets in North and South America, Australasia and Europe. The partnership operates high quality, long-life assets that generate stable cash flows and require relatively minimal maintenance capital.
Brookfield Infrastructure currently has a Zacks Rank #4 (Sell). Other stocks in the industry that are worth considering include CPFL Energia S.A. (CPL) and Companhia Paranaense de Energia (ELP) with a Zacks Rank #1 (Strong Buy), and ALLETE, Inc. (ALE) with a Zacks Rank #2 (Buy).
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