Pembina Pipeline Corp. has agreed to acquire Inter Pipeline Ltd. in a share-for-share transaction valued at $8.3 billion (Can.) that would create one of the largest energy infrastructure companies in Canada, the companies said in a joint statement June 1.
The combination would benefit customers via lower costs through economies of scale, the conversion of products into higher value materials, such as converting propane to polypropylene, and by gaining access to higher value markets both locally and globally, the companies said.
Pembina is the largest gatherer of condensate in the Western Canadian Sedimentary Basin (WCSB) through the Peace Pipeline and Drayton Valley pipeline systems and one of two importers of condensate through Cochin Pipeline. Inter Pipeline delivers condensate to consuming regions through its multi-line condensate delivery system. Combined, the operator would have the capacity to transport 6.2 million b/d of gas, oil, and NGL throughout the region.
The companies expect near-term synergies of $150-200 million (Can.) annually. About $100-150 million is expected from lower general, administrative and operating costs expected to be realized in the first year after closing. The remaining $50 million will come from commercial and product optimization, including optimization of the Redwater complex, expected to be realized in the second year after closing, the companies said.
Once the Heartland Petrochemical Complex (HPC) is in full service, the combine is expected to generate $1.1-1.4 billion (Can.) of adjusted cash flow from operating activities after dividends annually (OGJ Online, Apr. 5, 2021).
The government of Alberta approved a $408-million (Can.) grant under its Alberta Petrochemicals Incentive Program (APIP) to support Calgary-based Inter Pipeline’s HPC—Canada’s first integrated propane dehydrogenation (PDH) and polypropylene (PP) complex—now under construction in Strathcona County, Alta.
The deal derisks and enhances the value of HPC, by combining it with Pembina's 60,000 b/d of propane supply infrastructure in Fort Saskatchewan, eliminating the long-term supply risk for HPC and improving the possibility of a second such facility, the companies said.
The deal, expected to close in this year’s fourth quarter, is subject to shareholder approval, regulatory approvals, and the approval of the Court of Queen's Bench of Alberta.
Inter Pipeline Ltd. is recommending shareholders reject a hostile takeover bid at a value of $16.50/share from a Brookfield Infrastructure Partners LP affiliate and recommending shareholders support the combination with Pembina Pipeline valued at $19.45/share.