Pembina Pipeline to buy Veresen in $5.9-billion deal
Transaction approved by company boards, expected to close by fourth quarter
Pembina Pipeline Corp. agreed to buy all outstanding shares of Veresen Inc., the company developing a controversial natural gas export terminal on the U.S. West Coast, in a transaction valued at $5.9 billion in equity value.
Calgary-based Pembina (PPL) is offering either 0.4287 per common shares of Pembina or $18.65 in cash for shares of Veresen, the companies said in a joint statement Monday. The offer implies a 23-per-cent premium to Veresen’s April 28 closing price.
Veresen surged last month after White House National Economic Council director Gary Cohn said the administration of U.S. President Donald Trump will permit a liquefied natural gas terminal in the Pacific Northwest.
“The combined entity will continue to build upon the momentum of the Jordan Cove liquefied natural gas development project as it progresses toward key regulatory and commercial milestones,” according to the statement.
The deal continues a trend that has seen consolidation among Canadian companies to be better positioned for U.S. asset deals, analysts from Credit Suisse Group AG wrote in a note Monday. Most of Pembina’s natural gas liquids, condensate, crude oil and heavy oil assets are already physically connected to or are in a position to link with Veresen’s gas midstream infrastructure, “with relative ease,” according to the statement.
Credit Suisse added, “We regard the deal as being sound for PPL’s industrial logic at this juncture.”
The deal “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,” Randall Findlay, chairman of Pembina’s board, said.
“We regard the deal as being sound for PPL’s industrial logic at this juncture.” CREDIT SUISSE NOTE TO INVESTORS
The transaction was unanimously approved by the boards of directors of both companies and is expected to close by the fourth quarter. The deal is subject to approval of at least twothirds of Calgary-based Veresen shareholders and Canadian and U.S. regulators.
Upon completion of the deal, Pembina’s common shareholders are expected to own about 80 per cent of the combined company while Veresen’s shareholders will own about 20 per cent. Pembina also intends to increase its dividend by 5.9 per cent.