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LONDON, UK / ACCESSWIRE / May 2, 2017 /Active Wall St. blog coverage looks at the headline from Pembina Pipeline Corp. (NYSE:PBA) as the Company announced on May 01, 2017, that it has entered into an agreement to acquire Veresen Inc. The merger of the two Calgary, Canada based Companies will result in the formation of one of the largest energy infrastructure companies in Canada with an estimated pro-forma enterprise value of C$ 33 billion. Register with us now for your free membership and blog access at:


One of Pembina Pipeline’s competitors within the Oil & Gas Pipelines space, ONEOK, Inc. (NYSE:OKE) and ONEOK Partners, L.P. (NYSE:OKS), will release their Q1 2017 earnings after the market closes on May 02, 2017. AWS will be initiating a research report on ONEOK, Inc. and ONEOK Partners in the coming days.

Today, AWS is promoting its blog coverage on PBA; touching on OKE and OKS. Get all of our free blog coverage and more by clicking on the link below:


Both Companies boast assets in several key oil and gas producing areas in Alberta, British Columbia, and the Bakken Formation on the Canada/US border. Apart from geographical coverage, the merged Company will have a diverse product portfolio that includes crude oil, liquids and natural gas pipelines, terminals, storage and midstream operations, gas gathering and processing facilities as well as fractionation facilities.

Commenting on the acquisition, Randy Findlay, Chairman of Pembina’s Board of Directors said:

“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 percent upon close of the Transaction.”

Stephen Mulherin, Chairman of Veresen’s Board of Directors added:

“The creation of an integrated business across the energy infrastructure value chain results in a combined entity that is greater than the sum of its parts. Furthermore, we believe combining these two organizations 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.”

Details of the Transaction

As per terms of the agreement, Pembina will acquire all outstanding shares, including preferred shares, of Veresen and assume its debt including its subsidiary debt. Veresen’s shareholder can opt to receive either 0.4287 share of Pembina or C$ 18.65 for each share that they hold. This transaction is based on the condition that maximum share consideration on a pro-rata basis would not exceed 99.5 million Pembina’s common shares and the cash would not exceed C$ 1.523 billion. Assuming that Pembina distributes shares and cash on pro-rata basis, each Veresen shareholder is expected to receive C$ 4.8494 in cash and 0.3172 common shares of Pembina. The transaction represents a 22.5% premium of Veresen’s shares closing price of C$ 15.23 at the Toronto Stock Exchange on April 28, 2017, the last trading day before the deal was announced.

Veresen’s preferred shareholders will receive the same offer; however in exchange they will receive Pembina’s preferred shares. The exchange is subject to the approval of 66% or 2/3rd preferred shareholders of Veresen, but their approval is not conditional for the completion of the merger transaction.

The deal has been approved by the Board of Directors of both Companies and the transaction is expected to close in late Q3 2017 or early Q4 2017. The deal is subject to approval of 66% or 2/3rd shareholders of Veresen, approval from the Court of Queen’s Bench, regulatory approvals from US and Canadian regulators, and other closing conditions.

Once the transaction is complete Pembina’s shareholders will own 80% stake and Veresen’s shareholders will own 20% stake in the new merged entity.

Pembina plans to finance the cash portion of the transaction via an unsecured credit of C$ 2.5 billion. Later on, it plans to refinance the same by utilizing its cash in hand and issuing medium Term Notes and preferred shares.

Once the transaction is completed, Pembina’s current management team will take over the running of Veresen. The management team will be led by Pembina’s Mick Dilger as President and CEO. Don Althoff, Veresen’s President and CEO, will also be part of the merged entity’s management team. Three members from Veresen’s current Board of Directors will become members of Pembina’s Board of Directors post the merger. Randy Findlay will continue as the Chairman of the Board of Directors of the new merged Company.

Key benefits of the transaction

The merger will result in a combination assets base that is physically connected or has the potential to be connected in the future. The interconnectivity of assets will result in better integration of operations which will in turn result in significant synergies which will help in overall improvement of customer service.

Pembina’s assets are mainly located in the Western Canadian Sedimentary Basin (WCSB) which includes Deep Basin, Duvernay and Alberta Montney, whereas Veresen’s assets are located in British Columbia (BC), Montney. The merged entity is expected to own approximately 5.8 bcf/d (net) of gas processing infrastructure across the WCSB by 2018. The merger entity will have assets in the very productive US Rockies, where Pembina does not have any position.

Pembina’s product portfolio is mainly liquid like crude oil, heavy oil etc., whereas, Veresen’s product portfolio is mainly natural gas. The merger will not only result in the diversification of the product portfolio and expansion of its geographical footprint, but also offer better services to its customers.

Post the completion of the transaction, the merged Company is expecting its low-risk, fee-for-service adjusted EBITDA to increase more than 85%, while its pro-forma adjusted EBITDA is expected to increase to C$ 2.55 billion- C$ 2.75 billion in 2018. Pembina expects that the transaction to be accretive to its adjusted cash flow per share on a run-rate basis starting from FY18. The transaction is expected to result in annual cost synergies and tax benefits of C$ 75 million to C$ 100 million. Pembina is planning to increase the monthly dividend payable on its common shares by 5.9%, once the transaction is completed.

Since Pembina expects that the merged Company will have 85% of its revenues from “fee-for-services”, which will provide a strong cash flow and balance sheet.

Since the merger will result in a Company with an enterprise value of over C$ 33 billion, the merged Company will be well equipped to take on projects at a much larger scale and complexities than what they would have been able to do individually.

Stock Performance

At the closing bell on Monday, May 01, 2017, the stock closed the trading session at $ 30.74, dropping 3.58% from its previous closing price of $ 31.88. A total volume of 705.64 thousand shares have exchanged hands, which was higher than the 3-month average volume of 304.46 thousand shares. Pembina Pipeline’s stock price advanced 2.50% in the previous twelve months. Shares of the company have a PE ratio of 41.04 and currently have a market cap of $ 12.20 billion.

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