Pembina Pipeline to acquire Veresen for $9.7bn

Transportation and midstream service provider Pembina Pipeline has signed an arrangement agreement to acquire all issued and outstanding shares of energy infrastructure company Veresen.

The transaction, valued at approximately $9.7bn including Veresen’s debt, is aimed at creating a company, which according to Pembina, will be one of the largest energy infrastructure companies in Canada with a pro-forma enterprise value of approximately $33bn.

Pembina is offering to buy all Veresen common shares in return for either 0.4287 of a common share of Pembina or $18.65 in cash, subject to pro-ration as per a maximum share consideration of around 99.5 million Pembina common shares and maximum cash consideration of around $1.52bn.

Assuming full pro-ration, each shareholder of Veresen will receive $4.8494 in cash, as well as 0.3172 of a common share of Pembina for every common share of Veresen.

The portfolio of the new entity will include crude oil, liquids and natural gas pipelines, terminal, storage and midstream operations, gas gathering and processing facilities, as well as fractionation facilities.

Pembina board of directors chairman Randy Findlay said: “This transaction is highly strategic for Pembina and Veresen alike, providing clear visibility to creating long-term value for our respective shareholders.

“It represents an ideal opportunity to continue building on our respective low-risk, long-term, fee-for-service business models while growing and substantially diversifying our respective asset bases.

“The combined platform offers compelling customer service offering enhancements, as well as integration and investment potential, exceeding what we could do individually.

“Combined, these factors give us confidence to increase our dividend by 5.9% upon closing of the transaction.”

Veresen board of directors chairman Stephen Mulherin said: “The combined scale and financial strength, along with a proven track record of safe, on-time and on-budget project delivery, gives us confidence that the collective growth programme currently under construction of approximately $6 billion will translate into meaningful value for shareholders.

“Furthermore, we believe combining these two organisations augments our ability to compete for future investment opportunities and execute on a larger, more complex suite of opportunities than each company on a stand-alone basis.”

The transaction is expected to close late in the third quarter or early in the fourth quarter of this year.