Pembina Pipeline (TSX: PPL) has agreed to acquire Veresen (TSX: VSN) in a deal that will create an energy infrastructure company with a pro-forma enterprise value of roughly C$33 billion (about $24.15 billion). The deal will help Pembina achieve the scale required to expand into the US and provide some much-needed balance sheet stability, creating a combined business that will boast 5.8 billion cubic feet per day of gas processing infrastructure in western Canada by next year.
The deal bucks a sustained downward trend for energy M&A deal flow in the face of crude oil prices that continue to hover around $50 per barrel. After annual deal count declined in both 2015 and 2016, the first quarter of the new year brought another drop, all the way to 106 new energy deals involving companies based in North America or Europe, per PitchBook’s 1Q 2017 M&A Report. But those transactions accounted for $72.2 billion in total value—a QoQ increase.
Narrowing in on the energy infrastructure, storage and transportation space, M&A dealmakers have completed just 17 transactions to date in 2017, per PitchBook data, putting them on pace for 51 deals—well short of 2015’s total of 80 and 2016’s total of 67. However, seven new deals from this year are still in the pipeline, with four others yet to close after first being announced last year.
Valued at C$9.7 billion (~$7.1 billion) including the assumption of debt, the transaction between Pembina and Veresen represents a 22.5% premium to Veresen’s closing share price on Friday. Under the terms of the deal, Veresen’s shareholders can choose to receive either C$18.65 per share in cash or 0.43 of a Pembina share for each of their own shares. Pembina stock closed down 4% on Monday, while Veresen surged 19% to close at C$18.12, establishing a market cap of C$5.75 billion.
Download our 1Q 2017 M&A Report by clicking here!
Article by Adam Putz, PitchBook