Pembina and Veresen team up in $9.7B merger
Yet another merger was announced in the midstream sector this week, this time between Pembina Pipeline and Veresen.
Under terms of the agreement, Veresen shareholders will receive $4.8494 in cash and 0.3172 Pembina shares for each Veresen share held. The offer represents a 20% premium to Veresen's share prices pre-announcement. The $9.7 billion merger is split $1.52 billion in cash and 99.5 million Pembina stock.
Pembina's core assets are primarily focused on the transportation of condensate, crude oil, heavy oil and processing of NGLs while Veresen's assets provide exposure to natural gas midstream infrastructure.
The combined company will have 5.8 billion cubic feet per day of gas processing infrastructure by the end of 2018 and 3 million boe/day of pipeline capacity.
Pembina says it expects to save $75 to $100 million annually in overhead and operating costs, as well as tax efficiencies. The new company will derive 25 to 30% of its revenues in US dollars.
Veresen's Board Chair Stephen Mulherin says the combined company is "greater than the sum of its parts." Pembina's Board Chair Randy Findlay expects the company to boost its dividend 5.9% after the deal closes, to $2.16 per share annually.
Pembina's Senior Executive Team will run the combined company, leaving Mick Dilger as President and CEO. Three Veresen board members will be appointed to Pembina's Board of Directors.
The transaction has already been approved by both Boards of Directors but Veresen still needs approval from 66.7% of its shareholders.
The "new" Pembina will have an enterprise value of $33 billion, making it Canada's third largest midstream company behind Enbridge (valued at $91 billion) and TransCanada ($55 billion).
VERESEN INC PEMBINA AND VERESEN TO CREATE LEADING NORTH AMERICAN ENERGY INFRASTRUCTURE COMPANY
PEMBINA PIPELINE INC PEMBINA AND VERESEN TO CREATE LEADING NORTH AMERICAN ENERGY INFRASTRUCTURE COMPANY
PEMBINA & VERESEN COMBINATION PRESENTATION
REUTERS PEMBINA BUYS VERESEN FOR US$7.1 BILLION AS PIPELINE SECTOR CONSOLIDATES