Pembina Pipeline Corp. has agreed to acquire fellow Calgary infrastructure firm Veresen Inc. in a $7.1-billion stock-and-cash deal, forming a company with a pro-forma enterprise value of $24 billion.
The combined firm will have a large position in the Western Canada Sedimentary Basin (WCSB) with Pembina's assets primarily in the Deep basin, Duvernay, and Alberta Montney and Veresen's in the Montney of British Columbia. Pembina's assets are primarily focused on NGL, condensate, crude oil, and heavy oil, while Veresen's comprise natural gas midstream infrastructure.
The majority of the combined assets are already physically connected or present the opportunity to be connected, allowing for operational integration, potential synergies, and overall enhancements to customer service, the firms said.
Pembina and Veresen will own 5.8 bcfd (net) of gas processing infrastructure across the WCSB by 2018. The combined infrastructure is complementary and will be integrated with Pembina's previously announced pipeline expansions in the Montney of Alberta and British Columbia, including the firm's $2.4-billion (Can.) Phase III Expansion expected to be complete in July.
The combined entity also will have exposure to hydrocarbon reserves in key producing basins in the US Rockies-where Pembina does not currently have a position-by way of the Ruby pipeline. The Ruby pipeline provides for 1.5 bcfd (gross) of transportation capacity from several Rockies resource plays.
Deal terms
Under the terms of the agreement, Pembina is offering to acquire all of the outstanding Veresen common shares in exchange for either 0.4287 of a common share of Pembina or $18.65 (Can.) in cash, subject to pro-ration based on maximum share consideration of 99.5 million Pembina common shares and maximum cash consideration of $1.523 billion.
Assuming full proration, each Veresen shareholder would receive $4.8494 in cash and 0.3172 of a common share of Pembina for each Veresen common share. This offer represents a 21.8% premium to Veresen's 20-day weighted average price of $15.31 and a 22.5% premium to Veresen's closing share price of $15.23 on Apr. 28.
The deal value covers the assumption of Veresen's debt-including subsidiary debt-and preferred shares.
The deal has been unanimously approved by the boards both companies and is expected to close late in the third quarter or early in the fourth quarter. Upon completion, Pembina's common shareholders are expected to own 80% of the combined company and Veresen's are expected to own 20%.