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Pembina Pipeline Buys Canada’s Provident Energy for $3.1 Billion in Stock

Pembina Pipeline Corp. (PPL), an oil and gas pipeline operator, agreed to buy Provident Energy Ltd. (PVE) for C$3.2 billion ($3.1 billion) to add natural gas liquids assets.

Provident shareholders will receive 0.425 of Pembina stock for each share held, or about C$11.86, Calgary-based Pembina said today in a statement. That represents a premium of 25 percent based on last week’s closing share prices.

The transaction will create one of Canada’s largest publicly traded energy-infrastructure companies by adding Provident’s natural gas liquids extraction, storage and transportation services to Pembina’s 7,500 kilometer- (4,661 mile-) network. The two companies are combining amid increased production of oil sands and shale gas in Alberta and British Columbia and near-record low prices for natural gas.

“It’s a good fit because there’s not a lot of overlap between the two companies,” said Megan Macneill, a Vancouver- based analyst at Haywood Securities Inc. who rates Provident shares “sector outperform” and doesn’t own any.

Provident, based in Calgary, owns so-called midstream assets and services such as storage, transportation and logistics and extraction operations for the natural-gas industry mostly in western Canada, according to its website.

“Our expanded footprint will provide greater access to natural gas liquids markets across North America and will allow us to offer customers a significantly expanded spectrum of energy services,” Pembina Chief Executive Officer Bob Michaleski said in the statement.

Canadian Footprint

Natural gas liquids are fluid fuels associated with the production of gaseous natural gas and can be refined into a variety of products.

The merged company will operate under the Pembina name and be led by a combination of Pembina’s and Provident’s current managers, Pembina said in the statement, without providing details. Pembina also said it plans to make an offer to owners of Provident’s convertible debentures following the closing of the deal.

The combined company will have a market value of about C$7.9 billion and have business in regions such as Montney and Duvernay in British Columbia as well as the Alberta Deep Basin, according to the statement. It will be able to transport gas from the Marcellus and Utica shale deposits that have helped turn the U.S. into the largest natural-gas producer in the world.

Canada’s largest pipeline owners are TransCanada Corp. (TRP) and Enbridge Inc., both based in Calgary.

Deal Advisers

Provident surged 18 percent to C$11.20 at the close in Toronto. Pembina fell 4.3 percent to C$26.70.

Pembina was advised by Scotia Waterous Inc. and law firms Blake, Cassels & Graydon LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP. Provident was advised by TD Securities Inc. and law firms Norton Rose Canada LLP, Dorsey and Whitney LLP and Andrews Kurth LLP.

Today’s deal was in line with the average premium for Canadian pipeline transactions of 26.6 percent, according to data compiled by Bloomberg.

The acquisition is the largest Canadian pipeline deal since Kinder Morgan Inc. bought FortisBC Holdings Inc. for C$6.7 billion in 2005. Last year, Plains All American Pipeline LP (PAA) bought BP Plc (BP/)’s natural gas liquids pipeline and processing business in Canada for $1.67 billion.

Kinder Morgan, based in Houston, agreed in October to buy El Paso Corp. (EP) for $21.1 billion to create the largest natural- gas pipeline in the U.S. That acquisition was the largest takeover of a pipeline company.

To contact the reporters on this story: Jeremy van Loon in Calgary at jvanloon@bloomberg.net; Brian Swint in London at bswint@bloomberg.net

To contact the editors responsible for this story: Susan Warren at susanwarren@bloomberg.net; Will Kennedy at wkennedy3@bloomberg.net

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