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Pembina Buys Canadian Rival Inter Pipeline For $6.9bn

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Pembina Pipeline Corporation is to buy Inter Pipeline in an all-stock deal which values its Canadian energy rival at $6.9bn.

Inter Pipeline had also been the focus of a hostile takeover bid from Brookfield Infrastructure Corporation, which it rejected at the end of May.

Margaret McKenzie, Inter Pipeline’s chair of the Board of Directors, commented, “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.” McKenzie went on to add, “The creation of a more highly integrated business across the energy infrastructure value chain results in a combined entity that is greater than the sum of its parts. The combined asset suite, financial strength, and operational foundation, makes us highly confident that the Transaction will translate into significant value for all stakeholders, both immediately and into the future.”

The combined entity will continue to be led by Pembina’s senior executive team. Representation from Inter Pipeline on Pembina’s board of directors will be determined prior to closing of the transaction.

The Transaction will create one of the largest energy infrastructure companies in Canada, with a value of $53bn and a diversified and integrated asset base that can support and grow an extensive value chain for natural gas, natural gas liquids and crude oil, from wellhead to end user. 

Furthermore, past and future investments by both companies will help access new demand markets for the Western Canadian Sedimentary Basin benefitting Pembina, its customers and the provinces of Alberta and British Columbia alike.

Once the Heartland Petrochemical Complex is in full service, the combined company is expected to generate $1.1bn to $1.4bn of adjusted cash flow from operating activities after dividends annually, enhancing its ability to fund existing and future capital investment.

The combination will also accelerate and de-risk accretive investment opportunities across various value chains, allowing for deployment of capital into projects at attractive rates of return. In addition to the projects currently under construction, the combined company has visible and highly probable unsanctioned investment opportunities of more than $6bn.

“The Transaction is highly strategic for both Pembina and Inter Pipeline, providing clear visibility to creating long-term sustainable value for our respective shareholders,” said Randy Findlay, Pembina’s chair of the Board of Directors. “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 realization of synergies, vertical integration and high return growth opportunities.” 

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