Pembina Pipeline Corp. (NYSE: PBA) said it would buy smaller rival Veresen Inc. in a stock-and-cash deal valued at C$9.7 billion (US$7.10 billion), including debt, giving the Canadian pipeline operator access to natural gas pipelines and processing infrastructure.
The combined company will have a strong position in the Western Canadian Sedimentary Basin, home to the world's third largest crude reserves.
A rebound in oil prices from a two-year slump and prospects of friendlier regulatory and tax policies in the U.S. are stoking consolidation in the pipeline industry.
Pembina's deal for Veresen comes in the wake of Enbridge Inc.'s (NYSE: ENB) $28 billion acquisition of Spectra Energy, announced in September, and TransCanada Corp.'s (NYSE: TRP) $10 billion purchase of Columbia Pipeline Group in March last year.
After the deal with Veresen, Pembina will own about 5.8 billion cubic feet per day of gas processing infrastructure across Western Canada by 2018.
Pembina's portfolio includes an oil sands and heavy oil unit that operates about 1,650 km of pipeline with capacity of about 975,000 barrels per day.
The company also has a 10,000 km oil pipeline network, including expansions in the works, extending across Alberta and parts of British Columbia, Saskatchewan and North Dakota.
Veresen's pipeline business made up over half of its asset base at 2016-end and has a stake in a pipeline delivering crude oil from Alberta, British Columbia and North Dakota to Midwest U.S.
It also holds interest in a 680-mile natural gas pipeline extending from Wyoming to Oregon, and owns the Alberta Ethane Gathering System, which is made up of three interconnected pipelines.
Pembina said Veresen shareholders could opt to get either 0.4287 of a Pembina share or C$18.65 in cash.
The offer is at a 22.5% premium to Pembina's last close, the companies said.
Pembina said it would pay as much as about C$1.52 billion in cash and 99.5 million in shares.
The company also said it would increase its dividend by 5.9% upon deal close—expected late third quarter or early fourth quarter.
CIBC World Markets Inc. is Pembina's financial adviser. Blake, Cassels & Graydon LLP and Bracewell LLP are its legal advisers. Scotiabank is advising Veresen, while Osler, Hoskin & Harcourt LLP is providing legal counsel. (US$1 = 1.3668 Canadian dollars)
Recommended Reading
Diamondback Stockholders All in for $26B Endeavor Deal
2024-04-29 - Diamondback Energy shareholders have approved the $26 billion merger with Endeavor Energy Resources.
Imperial Oil Names Exxon’s Gomez-Smith as Upstream Senior VP
2024-04-30 - Cheryl Gomez-Smith, currently director of safety and risk at Exxon Mobil’s global operations and sustainability business, will join Imperial Oil in May.
CEO: Coterra ‘Deeply Curious’ on M&A Amid E&P Consolidation Wave
2024-02-26 - Coterra Energy has yet to get in on the large-scale M&A wave sweeping across the Lower 48—but CEO Tom Jorden said Coterra is keeping an eye on acquisition opportunities.
Permian Resources Declares Quarterly Base, Variable Dividends
2024-02-29 - Permian Resources’ dividends are payable March 21 to shareholders of record by March 13.
Matador Stock Offering to Pay for New Permian A&D—Analyst
2024-03-26 - Matador Resources is offering more than 5 million shares of stock for proceeds of $347 million to pay for newly disclosed transactions in Texas and New Mexico.