Pembina Pipeline Corporation has agreed a deal to buy Inter Pipeline for C$8.3 billion (€5.64 billion), creating one of the largest energy infrastructure companies in Canada.
Inter Pipeline shareholders will receive 0.5 of a Pembina share for each share of Inter Pipeline that they own the equivalent of C$19.45 per share. The combined company will be led by Pembina’s senior team and will have a value of C$53 billion. Its asset base will support natural gas, natural gas liquids and crude oil, ‘from wellhead to end user’, according to the companies. Pembina shareholders will hold 72% of the combined company, with Inter Pipeline shareholders owning the remaining28 %.
Inter Pipeline has been fending off a hostile takeover from Brookfield Infrastructure Partners, of C$16.50/share, announced in February 2021. Inter Pipeline has repeatedly urged its shareholders to reject the offer, saying it undervalues the company, and has reiterated the plea, particularly in the light of Pembina’s higher offer, which represents a premium of 17.8%. Pembina’s offer has been unanimously approved by Inter Pipeline’s board.
’After a comprehensive review of strategic alternatives by the Special Committee of the Board of Directors of Inter Pipeline, it was evident that a combination with Pembina offered compelling value for Inter Pipeline shareholders in the short-term, as well as the opportunity to participate in the upside of HPC and the combined business longer-term, says Margaret McKenzie, Inter Pipeline’s chair, and chair of the Special Committee.
The combined company will generate near-term synergies of $150 to $200 million annually, and with the completion of the Heartland Petrochemical Complex (HPC), is expected to generate C$1.1–1.4 billion of adjusted cash flow from operating activities after dividends.
Pembina chair Randy Findlay says that the combination represents long-term sustainable value for both companies’ shareholders.
‘It represents a compelling opportunity to continue building on our respective low-risk, long-term, fee-for-service business model, expand our customer service offerings, and create significant value through the realisation of synergies, vertical integration and high return growth opportunities. Pembina’s strategy of maximising the value of its products through global market access is strengthened with the addition of HPC, which will allow us and our customers to benefit from additional margin capture. A core part of our strategy is the commitment to ESG, including making investments to enhance the long-term sustainability of our business and reducing the carbon intensity of what we do,’ he adds.
The transaction is subject to regulatory and shareholder approval. It is expected to completed in Q4 2021.