Pem­bina Pipe­line plans friendly takeover of Vere­sen in $9.7B deal

The Hamilton Spectator - - BUSINESS - IAN BICKIS

Pem­bina Pipe­line Corp. an­nounced Mon­day a $9.7bil­lion friendly takeover of­fer for Vere­sen Inc. in the lat­est case of en­ergy com­pa­nies push­ing for scale and di­ver­si­fi­ca­tion in un­cer­tain times.

The Calgary-based com­pa­nies both pro­vide pipe­line, stor­age and pro­cess­ing in­fra­struc­ture in sev­eral key oil-and-gas pro­duc­ing ar­eas of West­ern Canada, but their geo­graphic and prod­uct pro­files are com­ple­men­tary, their of­fi­cials told a con­fer­ence call with fi­nan­cial an­a­lysts.

“We are pre­dom­i­nantly a liq­uids com­pany, Vere­sen is pre­dom­i­nantly a gas com­pany. And I think that is the magic,” Pem­bina CEO Mick Dil­ger said. “Now we can bring both service of­fer­ings to our cus­tomers.”

Vere­sen CEO Don Althoff said there will be more near-term growth op­por­tu­ni­ties than ei­ther com­pany could achieve sep­a­rately be­cause of Pem­bina’s fi­nan­cial strength and the lo­ca­tion of Vere­sen’s op­er­a­tional base.

“The plays you serve mat­ter — es­pe­cially in lower com­mod­ity price en­vi­ron­ments — be­cause it’s the most pro­lific and eco­nomic ar­eas that will con­tinue to grow and be de­vel­oped,” Althoff said.

Al­taCorp Cap­i­tal an­a­lyst Dirk Lever said the deal was a great fit for both com­pa­nies.

“There’s ter­rific syn­er­gies be­tween the two com­pa­nies, there’s re­ally no over­lap at all,” he said.

The com­pa­nies said they ex­pect to achieve up to $100 mil­lion in an­nu­al­ized pre-tax ef­fi­cien­cies through a com­bi­na­tion of cost sav­ings and growth.

The deal, which the com­pa­nies said would cre­ate one of the largest en­ergy in­fra­struc­ture firms in Canada, will make it eas­ier to fi­nance what are in­creas­ingly ex­pen­sive growth projects, said Lever.

“It’s no longer a mil­lion dollar game that we’re look­ing at, it’s a bil­lion dollar game. And you need the size and heft in or­der to get these projects done,” he said.

Althoff said their pro­posed US$3-bil­lion Jor­dan Cove liq­ue­fied nat­u­ral gas ter­mi­nal could ben­e­fit from the com­bined bal­ance sheet, though they have reg­u­la­tory and con­tract bar­ri­ers to solve there as well.

“This was al­ways the project that was just a lit­tle too big for Vere­sen, but it’s not too big for the com­bined en­tity,” he said.

Pem­bina also has sev­eral big projects in the works, in­clud­ing a po­ten­tial $4-bil­lion polypropy­lene up­grader that would ben­e­fit from an Al­berta gov­ern­ment in­cen­tive pro­gram.

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