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CORRECTED-UPDATE 3-Pembina adds natgas infrastructure with $7.1 bln Veresen buy
May 1, 2017 / 11:11 AM / 7 months ago

CORRECTED-UPDATE 3-Pembina adds natgas infrastructure with $7.1 bln Veresen buy

(Corrects paragraph 14 to say the offer is at a 22.5 percent premium to the last close of Veresen, not Pembina. The error also appeared in previous versions of the story)

* Pembina to pay as much as C$1.52 bln in cash, 99.5 mln in shares

* Offer at 22.5 pct premium to Veresen’s last close

* To pay either 0.4287 of a Pembina share or C$18.65 in cash

By Swetha Gopinath

May 1 (Reuters) - Pembina Pipeline Corp said it would buy smaller rival Veresen Inc in a stock-and-cash deal valued at C$9.7 billion ($7.10 billion), including debt, giving the Canadian pipeline operator access to natural gas pipelines and processing infrastructure.

The combined company will have a strong position in the Western Canadian Sedimentary Basin, home to the world’s third largest crude reserves.

A rebound in oil prices from a two-year slump and prospects of friendlier regulatory and tax policies in the United States are stoking consolidation in the pipeline industry.

Pembina’s deal for Veresen comes in the wake of Enbridge Inc’s $28 billion acquisition of Spectra Energy, announced in September, and TransCanada Corp’s $10 billion purchase of Columbia Pipeline Group in March last year.

After the deal with Veresen, Pembina will own about 5.8 billion cubic feet per day of gas processing infrastructure across Western Canada by 2018.

“VSN’s deep inventory of well-head oriented expansions should pair nicely with Pembina’s role as liquids aggregator across the (Western Canadian Sedimentary Basin),” analysts at Tudor, Pickering, Holt & Co said.

The combined company will have about 3 million barrels of oil equivalent per day of pipeline capacity.

“When we combine with Veresen who is...68 percent pipelines, we put the P back in pipelines in our name,” Pembina’s Chief Executive Michael Dilger said on a conference call, speaking of the breakup of Veresen’s operating margins.

At present, pipelines account for about 46 percent of Pembina’s margins.

Veresen has a stake in a pipeline delivering crude from Alberta, British Columbia and North Dakota to Midwest United States.

It also holds interest in a 680-mile natural gas pipeline extending from Wyoming to Oregon, and owns the Alberta Ethane Gathering System, which is made up of three interconnected pipelines.

Pembina said Veresen shareholders could opt to get either 0.4287 of a Pembina share or C$18.65 in cash.

Veresen shares jumped to as much as C$18.29. Pembina’s shares were down about 2.4 percent at C$42.40.

The offer is at a 22.5 percent premium to Veresen’s last close, the companies said.

Pembina said it would pay as much as about C$1.52 billion in cash and 99.5 million in shares.

The company also said it would increase its dividend by 5.9 percent upon deal close - expected late third quarter or early fourth quarter.

CIBC World Markets Inc is Pembina’s financial adviser, while Scotiabank is advising Veresen. ($1 = 1.3668 Canadian dollars) (Reporting by Swetha Gopinath in Bengaluru; Editing by Shounak Dasgupta)

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