Pembina Pipeline Corp. is acquiring Inter Pipeline Ltd. in a deal that includes a major polypropylene resin plant, although another company has increased its bid for the operations.
The deal between the two Canadian energy firms is valued at C$15.2 billion (US$12.6 billion), officials said in a June 1 news release.
The transaction will create one of the largest energy infrastructure companies in Canada, with a pro forma enterprise value of C$53 billion (US$44 billion) and an asset base that includes natural gas, natural gas liquids and crude oil. Both firms are based in Calgary, Alberta.
The deal includes the Heartland Petrochemical Complex, which includes a PP resin unit with annual production capacity of more than 1 billion pounds.
The transaction "is highly strategic for both Pembina and Inter Pipeline, providing clear visibility to creating long-term sustainable value for our respective shareholders," Pembina Chairman Randy Findlay said in the release.
Under terms of the transaction, Inter Pipeline shareholders will receive 0.5 shares of Pembina for each share of Inter Pipeline. When completed, Pembina shareholders will own 72 percent of the combined firm, with Inter Pipeline shareholders owning the remaining 28 percent. The combined entity will be led by Pembina's senior executive team.
In addition to shareholder approvals, the transaction is subject to regulatory approvals, as well as the approval of the Court of Queen's Bench of Alberta. The transaction is expected to close in the fourth quarter of 2021.
Inter Pipeline also has received a revised offer from Brookfield Infrastructure Partners LP of Toronto. Brookfield, Inter Pipeline's largest shareholder, had made an unsolicited bid for the firm in February.
Inter Pipeline officials said June 3 that they still prefer the Pembina bid. They said they considered both offers on May 31 before making the decision in favor of Pembina.
Located in Strathcona County, Alberta, the HPC will include the PP unit as well as a propane dehydrogenation unit making propylene monomer. Officials said that by combining HPC with Pembina's propane supply in Fort Saskatchewan, Alberta, long-term supply risk for HPC is eliminated.
The combination also improves the possibility of a second such facility, they added. The C$3.5 billion (US$2.9 billion) HPC is set to open later this year. When first announced in late 2017, Inter Pipeline officials said that the HPC "is expected to be one of the lowest-cost polypropylene producers in North America."