Brookfield Infrastructure Partners LP BIP-UN-T is acquiring the world’s largest freight container player, Triton International Ltd., for US$4.7-billion in cash and shares, as the industry seeks to rebound from an inventory overhang in some areas that is weighing on demand.
Brookfield is paying US$85 a share for Triton, US$68.50 of which will be paid in cash and the rest in class A exchangeable shares. The deal is a 35-per-cent premium to Triton’s closing price on Tuesday.
Shares of Triton jumped 32 per cent Wednesday on the New York Stock Exchange, closing at US$83.34. Including debt, the transaction is valued at about US$13.3-billion.
Triton is the world’s largest owner and lessor of freight containers, with a container fleet that encompasses more than seven million 20-foot equivalent units. “Triton is an attractive business with highly contracted and stable cash flows, strong margins and a track record of value creation,” Sam Pollock, chief executive of Brookfield, said in a news release.
“Brookfield Infrastructure’s significant resources and long-term investment horizon will support Triton’s franchise, underpin our commitment to providing unrivalled service, and support continued investment in our growing business,” said Brian Sondey, CEO of Triton.
Pending approval by Triton’s shareholders and required regulatory approvals, the transaction is expected to close in the fourth quarter.
More than 80 per cent of the world’s goods are transported by shipping containers sailing across the seas, according to the International Monetary Fund.
The COVID-19 pandemic led to widespread problems in global supply chains, but many of the issues are now being resolved. Still, shifts in consumer demand have led to some imbalances in the market. According to market forecaster Container xChange, the shipping industry is experiencing a freight recession as retailers who overstocked use up their excess stock.
The latest Drewry World Container Index, at US$1,710 a 40-foot container, is 36 per cent lower than its 10-year average of US$2,689 and down 79 per cent from a year ago, but 20 per cent higher than average prepandemic rates in 2019.
A survey conducted in April by Container xChange indicates that 48 per cent of supply chain professionals expect the shipping industry to strengthen this year and surpass last year’s peak.