Pembina Pipeline to acquire Veresen
Friday, May 05, 2017
Canadian midstream operator Pembina Pipeline is buying rival Veresen for C$9.7 billion (US$7.0 billion) including debt in a deal, announced on May 1, that will create one of the largest energy infrastructure companies in Canada.

Combined, the companies will have a value of roughly C$33 billion (US$24 billion) and a strong foothold in the Western Canadian Sedimentary Basin (WCSB).

“This transaction is highly strategic for Pembina and Veresen alike, providing clear visibility to creating long-term value for our respective shareholders,” Pembina’s chairman of the board, Randy Findlay, said in a statement. “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.”

Meanwhile, Veresen’s chairman of the board, Stephen Mulherin, said that combining Pembina and Veresen created a company “that is greater than the sum of its parts”.

Once the acquisition is complete, Calgary-based Pembina will own roughly 5.8 bcf (164.3 mcm) per day of gas-processing infrastructure in Western Canada by 2018. Both Pembina and Veresen – also based in Calgary – already have assets in several hydrocarbon-rich areas in Canada and the Bakken formation along the Canadian-US border.

Veresen is also the operator of a proposed LNG terminal in Oregon, on the US’ Pacific Coast. The project was previously rejected by US regulators, but a modified proposal has been filed with the US Federal Energy Regulatory Commission (FERC) and Pembina said in a statement that it intended to push ahead with the project.

Pembina’s offer is 22.5% above Veresen’s closing stock price on April 28. The company said it would pay a maximum of C$1.523 billion (US$1.107 billion) in cash and up to 99.5 million Pembina common shares as well as assuming Veresen’s debt.

After the deal was announced, Veresen shares shot up nearly 20% on the Toronto Stock Exchange (TSX) to C$18.22 (US$13.24) per share on May 1.

The Pembina-Veresen deal follows several other recent large mergers in North America’s midstream sector.

In September 2016, Enbridge announced its US$28 billion takeover of Spectra Energy, and TransCanada recently acquired Columbia Pipeline Group for US$13 billion.

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