Pembina and Veresen to create energy infrastructure company

Pembina Pipeline Corporation (Pembina) and Veresen Inc. (Veresen) have entered into an arrangement agreement to create one of the largest energy infrastructure companies in Canada with a pro-forma enterprise value of approximately CAN$33 billion. The combined company will feature an asset base supported by long-life, economic hydrocarbon reserves concentrated in some of the most prolific resource plays in North America. The diversified portfolio will include crude oil, liquids and natural gas pipelines, terminal, storage and midstream operations, gas gathering and processing facilities as well as fractionation facilities.The combined company expects to drive significant shareholder value through the following benefits of the transaction:The combined asset base is highly integrated across the value chain and extends the geographical reach of the combined company while enhancing its customer service offering.The combined company will benefit from diversification across basins and products, as well as customers and currency.The cash flows of the combined entity will be over 85% fee-for-service weighted, ensuring the maintenance of a strong balance sheet.The transaction creates an organisation of meaningful scale able to pursue larger growth projects.&ldquo;This transaction is highly strategic for Pembina and Veresen alike, providing clear visibility to creating long term value,&rdquo; said Randy Findlay, Pembina's Chair of the Board of Directors. &ldquo;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.&ldquo;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% upon close of the transaction.&rdquo; Stephen Mulherin, Veresen's Chairman of the Board of Directors, stated: &ldquo;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 programme currently under construction of approximately CAN$6 billion will translate into meaningful value for shareholders. Furthermore, we believe combining these two organisations 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.&rdquo;Summary of transaction termsThe transaction is valued at approximately CAN$9.7 billion, including the assumption of Veresen's debt (including subsidiary debt) and preferred shares.Under the terms of the arrangement agreement, Pembina is offering to acquire all of the outstanding Veresen common shares in exchange for either (i) 0.4287 of a common share of Pembina or (ii) $18.65 in cash, subject to pro-ration based on maximum share consideration of approximately 99.5 million Pembina common shares and maximum cash consideration of approximately CAN$1.523 billion. Assuming full pro-ration, each Veresen shareholder would receive CAN$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 CAN$15.31 and a 22.5% premium to Veresen's closing share price of CAN$15.23 on 28 April 2017.The transaction was unanimously approved by the Boards of Directors of both companies and is expected to close in late 3Q17 or early 4Q17. Upon completion of the transaction, Pembina's common shareholders are expected to own approximately 80% of the combined company and Veresen's shareholders are expected to own approximately 20%. Affirming their belief in the value of the transaction, the Board of Directors and executive management of Veresen will elect to receive share consideration.Furthermore, Veresen will be seeking approval of holders of outstanding Veresen preferred shares to effect the exchange of such shares for Pembina preferred shares with the same terms and conditions as the outstanding Veresen preferred shares. For such exchange to occur at closing of the transaction, approval of at least 662/3% of holders of Veresen's preferred shares is required, voting as one class, represented in person or by proxy at a special meeting of Veresen preferred shareholders to be called to consider the Transaction. Closing of the transaction is not conditional on the approval of the holders of Veresen's preferred shares.Read more here.

Pembina and Veresen to create energy infrastructure company

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