I’m a pretty big fan of data centers. As you’ll recall, I just recently made a bullish argument for Digital Realty (NYSE: DLR) in this article — and also mentioned that we added it to our portfolio over at High-Yield Investing.

So I’m pleased to see one of my favorite businesses, Brookfield Infrastructure (NYSE: BIP), expanding further into this lucrative niche.

The company just signed a deal to purchase 31 European data center properties from France’s Data4 for a price tag of $3.8 billion. Alongside power transmission lines, railroads, marine ports, and other fee-earning assets, the digital platform has become an important cog in this well-oiled machine.

BIP owns thousands of cell towers, miles of fiber optic cable, and dozens of corporate data centers. This segment generated $239 million in funds from operations (FFO) last year, a four-fold increase — helping to fund a 14th consecutive annual dividend hike.

Remarkably, though, this isn’t even the biggest news for Brookfield.

Another Big Deal…

On April 12, Brookfield made a bold $4.7 billion offer for Triton International (Nasdaq: TRTN) — another High-Yield Investing holding. According to terms, TRTN investors are set to receive $68.50 in cash and $16.50 in Brookfield stock – for total consideration of $85 per share.

That’s a hefty 35% premium to TRTN’s $63 closing price the day before the deal was announced. That morning, investors were greeted with a nice pop, with the stock opening at $82.56 – not far from the proposed bid.

For newer readers, Triton owns about 8 million metal shipping containers, which are leased to shipping lines worldwide. Robust global trade has buoyed both freight rates and container demand, driving the firm’s fleet utilization rate to 99.1% last year. It has made the most of savvy investments and sound market fundamentals, outperforming the S&P by more than a 2-1 margin since its IPO.

This deal comes during chronic shipping delays and fatigued supply chains, underscoring Triton’s unique capabilities. The company boasts a rarely-seen return on equity (ROE) approaching 30% and has systematically created wealth for stockholders – culminating in a 700% return since 2016.

Important Details

With stakes in BIP and TRTN, we are on both ends of this transaction. The deal has received the blessing of Triton’s board and is expected to close in the fourth quarter.

As the top transportation logistics provider in its respective field, Triton (and its contractual cash flows) will be a great fit for Brookfield. TRTN shareholders can elect to receive their compensation in cash, shares, or a mix – subject to pro-rated limits.

Keep in mind that there are two classes of Brookfield Infrastructure outstanding: BIP partnership units (which we own) and traditional common shares trading under the ticker BIPC. They are economically identical entities with the same $0.38 quarterly dividend distribution. While the common shares are preferable from a tax filing perspective, the units are more attractively priced – and thus also carry a higher yield.

This buyout transaction involves the BIPC shares. My advice? Take the cash, and if you wish to re-invest some (or all) of the proceeds in Brookfield, do so via the BIP units.

Closing Thoughts

Typically, shares of the acquiring company sell off modestly when a large deal like this is announced. But BIP is also gaining ground, suggesting the market likes both the strategic pairing and the price.

I always have mixed feelings when one of my holdings is taken off the board in this manner. I hate to see Triton go, but the 35% overnight windfall certainly lessens the sting. And I’m glad that this cash-generating business will stay within the HYI family.

I don’t expect any regulatory obstacles. But with TRTN trading close to the offer, we elected to cash out a 105% profit.

Meanwhile, BIP remains one of our best-performing long-term positions, with a total return of more than 350% since 2011 (vs. 250% for the S&P). And with smart acquisitions like this, it’s easy to see why it remains one of our all-time favorite holdings over at High-Yield Investing.

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