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