Pembina Pipeline Corporation this Monday announced a proposal for a strategic combination with Inter Pipeline Ltd. The proposal has the support of the company’s board, as Inter Pipeline’s shares represent a real opportunity for shareholders to upline their investments.
Firstly, the Pembina Pipeline-Inter Pipeline combination comes a response to the hostile takeover offer that Brookfield Infrastructure Partners launched recently. However, it is also the result of Pembina Pipeline acquiring Inter, just a week ago.
Secondly, as we reported previously, Pembina announced the acquisition as a $8,3 billion deal that created one of the largest energy pipeline companies in Canada. In fact, the all-stock transaction will result in a midstream company with an enterprise value of $53 billion.
Thirdly, Pembina also cautioned Inter Pipeline shareholders not to tender their shares to Brookfield Infrastructure Partners. As investing in those shares would deny them the significant potential upside of a combined company, while also creating tax exposure.
Moreover, under the strategic combination, Inter Pipeline shareholders will receive 0.5 shares of Pembina for each share of Inter Pipeline; which represents value of $19.45 per share, or a 45 percent premium to the unaffected price of Inter’s shares.
Furthermore, the strategic combination proposal comes as a straightforward offer that provides Inter Pipeline shareholders immediate value with greater upside; when compared with hostile Brookfield offer.
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Pembina Pipeline offers unique advantages for shareholders
In addition, according to the company’s statement, investing in the Brookfield offer would give them high tax impact; also, complexity and risks associated with holding Brookfield’s shares. Particularly with a portion of the consideration offered being redeemable, at Brookfield’s sole discretion, into a security that trades at a significantly lower price than the Brookfield shares.
On the other hand, among the benefits in investing in the strategic combination proposed by Pembina, are; shareholders of Pembina and Inter Pipeline will become investors in a large, liquid entity; which trades on major exchanges in Canada and New York, and is a member of the S&P/TSX 60 Index.
Also, upon closing, shareholders will benefit from an immediate 175 percent increase to their monthly dividend, compared to their current monthly dividend of $0.04 per Inter Pipeline share.
Furthermore, Pembina intends to increase its monthly common share dividend by an additional $0.01 per share; to $0.23 per share following the successful commissioning and in-service of the Heartland Petrochemical Complex.
Finally, Pembina’s President and Chief Executive Officer, Mick Dilger, said. “The Strategic Combination is a synergistic merger of complementary assets that is expected to lead to opportunities for significant expansion; customer benefits, material efficiencies and enhanced valuation; all of which are expected to benefit the shareholders of the combined company, and none of which can be realized with Brookfield.