BAM have always been upfront about the possible conflicts of interest, especially where the future transfer of the remainder of DBCT is involved, so I agree that establishing the committees is a prudent preparatory step.
There are a few stabilising influences involved though which are already in place to ensure that fairness is achieved for DBCT any other assets that presently make up the PIH trust. One of these is the 50% of PIH that is in big hands but not in BAM's ownership. That 50% will not want to see investment value or income diminished unnecessarily by transferring assets to BAM. When that 50% interest is eroded by the holdings being sold to smaller holders the strength equation will change, but until then, their return requirements will keep PIH producing income.
The DBCT sale terms included the review clauses so that BAM had a way of recuperating investment value in the case that PIH falls over and a sale of the remainder of DBCT became necessary. BAM may well use or try to use these clauses for other purposes and that is where the conflicts committees will need to establish what is best for both companies.
Holders need to understand that BAM have positioned themselves on near equal terms with all other holders in PIH and this is a strength of the company at the moment, not a weakness as may be suggested by the presence of the conflicts committees. BAM's prize was taking over PDPorts at the correct cyclical time for it to be successful for them, and gaining a 50% stake in DBCT, also at perfect cyclical timing.
It is well known that BAM need not be particularly concerned about the SP in the near term as it is income units they are interested in. It is likely the 50% have similar long term views, but if they start to bail out, then the situation alters. Same goes for a major asset sale event such as NGPL. The DBCT reviews expire eventually at a time when the income from PIH should be nicely covering the recent recap investments, and both BAM and the 50% will be sitting nicely thank you.
I have always stated that this company will need to be watched as it goes forward but this is true for any investment, bets were closed off a couple of months ago.
ifandwhen
opinion only
PIH Price at posting:
$3.86 Sentiment: LT Buy Disclosure: Held
