Canadian asset management giant Brookfield Asset Management (TSE:BAM) is about to make a very big deal. It means to pick up Colonial Pipeline in the United States, and shell out over $9 billion to do it. That price tag is leaving investors sputtering, and shares of Brookfield dropped just over 1.5% in Monday morning’s trading as a result.
Brookfield is landing quite a prize for its $9 billion, reports note, as Colonial represents the largest fuel transportation system in the United States. This is a deal that has been “several months” in the making, reports noted, as an ongoing auction process has finally borne fruit. The formal deal could arrive within the next few weeks, but the reports note that it is basically all over but the contract signings.
Colonial Pipeline had been in the process of selling off since last June, reports noted, and several interested parties stepped in on the resulting auction process. But with over 5,500 miles of pipeline running from Texas to New York, and over 100 million gallons of fuel per day going through, it is clear that Colonial represents a major part of energy infrastructure.
A Hit for Mark Carney
This news comes at kind of an odd time for Brookfield, and for Mark Carney, Liberal Leader of Canada who was co-chair of two investment funds therein. Reports noted that those two funds, worth around $25 billion all told, were both “…dedicated to the transition to a net-zero carbon economy.” These funds, interestingly enough, were registered in Bermuda, where there were “…significant tax advantages,” reports noted.
This by itself may not mean so much, but now that Carney is Liberal Leader for Canada, that is bringing up some major concerns about Carney’s plans for Canadian fiscal policy. And with the Trump tariffs making fiscal policy a front-and-center proposition, the timing will likely hit Carney particularly hard.
Is Brookfield a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on TSE:BAM stock based on seven Buys, four Holds and two Sells assigned in the past three months, as indicated by the graphic below. After a 23.59% rally in its share price over the past year, the average BAM price target of C$88.63 per share implies 29.71% upside potential.
