Back to top

Image: Bigstock

Pembina (PBA) Inks Deal to Buy Inter Pipeline for C$8.3B

Read MoreHide Full Article

Pembina Pipeline Corporation (PBA - Free Report) has entered into a definitive agreement with Inter Pipeline Ltd. (IPL) wherein it will acquire all the issued and outstanding shares of IPL in an all-stock deal worth C$8.3 billion.

Per the terms of the deal, which is unanimously approved by both companies' board members, IPL shareholders will receive 0.5 Pembina common stock for each IPL common stock they hold. Post the completion of this transaction, Pembina stockholders will own 72% interest of the combined entity while the rest will be owned by IPL stakeholders.

The C$15.2-billion deal including debt is expected to establish one of Canada's largest energy infrastructure companies as well as a diversified and integrated asset base capable of supporting and developing an extensive value chain for natural gas, natural gas liquids and crude oil from the wellhead to its end user.

The IPL acquisition follows Pembina’s $4.5-billion purchase of a Canadian unit and pipeline assets from Kinder Morgan Inc. (KMI - Free Report) in 2019. The transaction will expedite accretive investment possibilities across diverse value chains, allowing money to be deployed to projects at attractive rates of return, resulting in more free cash flow and greater yield for investors across the market. Pembina intends to raise its monthly dividend by 4.8% to 22 Canadian cents per share shortly after the deal closes.

The currently Zacks Rank #3 (Hold) Pembina will also take over IPL's Heartland Petrochemical Complex (HPC) in Alberta, which is currently under development. Following the successful commissioning and in-service of HPC, which is presently scheduled for 2022, increased cash flow from the facility is projected to support a cent per share raise in the monthly dividend to 23 Canadian cents. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The deal, which is the largest Canadian energy transaction in the last four years, is scheduled to be completed in the fourth quarter of this year, contingent on pending regulatory approvals, at least two-third of IPL shareholder nods and the fulfillment of other customary closing conditions.

Meanwhile, Brookfield Infrastructure Partners (BIP - Free Report) had earlier made an uncalled-for bid to acquire all the shares of IPL for a price considered between $17 and $18.25 per share. However, the latter had turned the offer down after comprehensively assessing the conditional proposals, which according to its board, had not reflected its true intrinsic value.

Nevertheless, anticipating a successful conclusion, the firm again made an offer earlier this year to purchase all the shares of IPL at C$16.50 per share. Per the terms of this new pact, each stockholder had the option to receive the amount either in cash or as 0.206 class A exchangeable shares of Brookfield Infrastructure Corporation (BIPC - Free Report) . However, IPL put its foot down on the same once more.

Company Profile

Founded in 1954, Pembina is a Canada-based vertically integrated operator of energy infrastructure assets. Headquartered in Calgary, Alberta, the company is active throughout the hydrocarbon value chain, offering a complete range of midstream and marketing solutions. Pembina Pipeline’s extensive network of conduits covers some of North America’s most prolific basins.

Zacks Names “Single Best Pick to Double”

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research SherazMian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>