Pembina Pipeline To Acquire Veresen For US$7.1 Billion

Published: May 01 2017
Deal Summary

Pembina Pipeline Corporation, a midstream energy company, entered into an arrangement agreement to acquire Veresen Inc., a diversified energy infrastructure company, for a purchase consideration of C$9,700 million (MM) (US$7,101.27 MM), including the assumption of debt and preferred shares.

Under the terms, Pembina Pipeline will fund the consideration through the issuance of (i) 0.4287 shares or (ii) payment of C$18.65 (US$13.65) in cash for each shareholder of Veresen, subject to pro-ration based on maximum share consideration of approximately 99.5 MM Pembina Pipeline common shares and maximum cash consideration of approximately C$1,523 MM (US$1,114.97 MM). Assuming full pro-ration, each Veresen shareholder would receive C$4.8494 (US$3.55) in cash and 0.3172 shares of Pembina for each Veresen common share held. The offer represents a 22.5% premium to Veresen's closing share price of C$15.23 (US$11.15) on April 28, 2017 and 21.8% premium to Veresen's 20-day weighted average price of C$15.31 (US$11.21). The company will finance the cash portion of the consideration from its unsecured credit facility.

Veresen owns and operates energy infrastructure assets across North America. Veresen is engaged in three principal businesses, which include a pipeline transportation business comprised of interests in the Alliance Pipeline, the Ruby Pipeline and the Alberta Ethane Gathering System; a midstream business which includes a partnership interest in Veresen Midstream Limited Partnership, which owns assets in western Canada, and an ownership interest in Aux Sable, which owns a natural gas liquids (NGL) extraction facility near Chicago, and other natural gas and NGL processing energy infrastructure.

CIBC World Markets Inc. is acting as financial advisor, while Blake, Cassels & Graydon LLP and Bracewell LLP are acting as legal advisors to Pembina Pipeline in the transaction. The Bank of Nova Scotia (Scotiabank) is acting as financial advisor and Osler, Hoskin & Harcourt LLP is acting as legal advisor to Veresen in the transaction.

The transaction will enable Pembina Pipeline to expand its midstream business operations.

The transaction is expected to be completed in late third quarter or early fourth quarter of 2017, subject to approval of shareholders of Veresen, approval of the Court of Queen's Bench, certain regulatory approvals in Canada and the US and other customary conditions.

Randy Findlay, chairman of the board of directors of Pembina Pipeline, 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 percent upon close of the Transaction."

Stephen Mulherin, chairman of the board of directors of Veresen, said, "The creation of an integrated business across the energy infrastructure value chain results in a combined entity that is greater than the sum of its parts. 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 program currently under construction of approximately $6 billion will translate into meaningful value for shareholders. Furthermore, we believe combining these two organizations augments our ability to compete for future investment opportunities and execute on a larger, more complex suite of opportunities than each company on a standalone basis."

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