The world’s largest owner and lessor of shipping containers, Triton International, is being taken private by Brookfield Infrastructure Partners in a deal valuing the company at $13.3 billion.
Brookfield Infrastructure (NYSE: BIP) will pay $85 per share for Triton (NYSE: TRTN), a 35% premium to Triton’s closing price on Tuesday. Triton shareholders will receive $68.50 per share in cash, with the remaining $16.50 paid in partial shares of Brookfield stock.
The deal, which Triton announced Wednesday, values Triton’s equity at $4.7 billion, with the remainder of the transaction price representing its net debt. The transaction is expected to close in the fourth quarter, subject to approval from Triton shareholders as well as regulatory approvals.
“We believe this transaction provides an excellent outcome for all of Triton’s stakeholders,” Triton CEO Brian Sondey said. “For our long-term shareholders, this transaction crystalizes a total shareholder return of approximately 700% since the 2016 merger of Triton and TAL International.”
That combination created the biggest container lessor in the world. Today, Triton has more than 7 million twenty-foot equivalent units in its fleet.
Triton will continue to operate with an investment-grade balance sheet but will now be able to access Brookfield’s $143 billion in assets under management to fund its future growth.
The current management team is expected to remain in place.
“Triton is an attractive business with highly contracted and stable cash flows, strong margins and a track record of value creation,” said Brookfield Infrastructure CEO Sam Pollock. “This transaction provides Brookfield Infrastructure with a high going-in cash yield, strong downside protection, and a platform for growth in the transportation and logistics sector.”
Intermodal containers were a tough find throughout the pandemic as labor shortfalls left boxes stuck at ports and warehouses. However, bottlenecks throughout the supply chain are easing, which has been reflected in Triton’s asset utilization metrics. The company’s box fleet entered 2022 nearly fully utilized at 99.6%, but that percentage was down to 97.6% at the time of its fourth-quarter report in February.
Triton capped 2022 with nearly $1.7 billion in leasing revenue and a little more than $700 million in adjusted net income. It used strong cash flow generation during the year to repurchase 14% of its outstanding shares, lower debt leverage and maintain a roughly 30% dividend payout ratio (dividends paid as a percentage of net income).
Private equity firms have been buying up providers with attractive cash flow qualities and asset portfolios that are covered by long-term leases.
“Triton is the market leader in container leasing and logistics which also provides Brookfield with a source of consistent underlying cash flows through its existing long-term contracts with strong counterparties,” Liam Burke, managing director at B. Riley Securities, told clients in a note.
In 2021, container lessor CAI was acquired by Mitsubishi HC Capital.
Goldman Sachs (NYSE: GS) is the exclusive financial adviser to Triton on the transaction. Brookfield Infrastructure is using BofA Securities (NYSE: BAC) and Mizuho Securities USA (NYSE.ADR: MFG).
Brookfield Infrastructure is part of Toronto-based Brookfield Corp., which manages approximately $800 billion in assets.
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Lijen
This transaction has thrown a lot of uncertainty to the preferred stockholders, and the discussion among preferred stockholders on online forums has exploded.
Jonathan
So what happens to the preferred stock holders of Triton?