Pembina Pipeline offers $9.7B for friendly takeover of competitor Veresen

​Pembina Pipeline Corp. said Monday it plans to acquire competitor Veresen Inc. in a friendly stock-and-cash takeover deal worth about $9.7 billion that would create one of the largest energy infrastructure firms in Canada.

Veresen shares soared by nearly 20 per cent in morning trading, gaining $2.99 to $18.22 on the Toronto Stock Exchange. Pembina's offer was worth the equivalent of $18.65 per Veresen share when announced.

Both Calgary-based companies boast assets in several key oil-and-gas producing areas in Alberta, British Columbia and the Bakken Formation that straddles the Canada-U.S. border.

Liquids on one side, gas on the other

Pembina and Veresen both provide pipeline, storage and processing infrastructure used by oil and gas producers, but their geographic and product profiles are complementary, their officials told analysts on a joint conference call.

"We are predominantly a liquids company, Veresen is predominantly a gas company. And I think that is the magic," Pembina CEO Mick Dilger said.

"Now we can bring both service offerings to our customers."

Veresen CEO Don Althoff said there will be more near-term growth opportunities than either company could achieve separately because of Pembina's financial strength and the location of Veresen's operational base.

"The plays you serve matter — especially in lower commodity price environments — because it's the most prolific and economic areas that will continue to grow and be developed," Althoff said.

"And that's where these businesses sit."

Big deals in industry

Both companies said they expect to achieve up to $100 million in annualized pre-tax synergies through a combination of cost savings and growth.

As part of the deal, Veresen shareholders would receive nearly $4.85 in cash and the rest in Pembina stock, assuming the maximum $1.523 billion in cash is issued. The offer is 22.5 per cent above Veresen's closing price of $15.23 on Friday.

The transaction, which is subject to approvals, would see Pembina increase its dividend by about six per cent.

The deal is one of several multibillion-dollar takeovers in Canada's pipeline industry in the last year.

In December, shareholders approved Enbridge's $28 billion US acquisition of Houston-based Spectra Energy, about half a year after TransCanada completed its takeover of Columbia Pipeline Group of Houston in a deal valued at $13 billion US.

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