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Pembina to Buy Provident Energy in Stock Deal Worth Over C$3B

  • Oil pipeline company Pembina Pipeline Corp. (PPL.T) said Monday it agreed to buy natural-gas-liquids infrastructure company Provident Energy Ltd. (PVX) for about C$3.2 billion (US$3.1 billion) in stock, creating Canada's third-largest energy infrastructure company.The purchase comes as natural gas producers move away from so-called dry gas fields, which just produce natural gas, to those that also yield petroleum liquids, including ethane, propane, butane and condensate. The surge of shale gas supplies in North America has depressed the price of dry gas, while natural gas liquids, or NGLs, trade closer to the higher price of crude oil.In a joint release early Monday, the Calgary-based companies said Provident shareholders will get 0.425 of a Pembina share for each share held, which, based on Pembina's C$27.90 closing price in Toronto Friday, is a premium of 24.7% over Provident's C$9.51 close.

  • Pembina shares declined 5.5% to C$26.37 in recent trading on the Toronto Stock Exchange, while shares of Provident jumped 16% to C$11.07.The deal would combine Pembina's crude oil pipeline and natural gas gathering system in Western Canada with Provident's NGL processing, storage and marketing operations located along major pipeline routes connecting Western Canada with markets in the United States and Eastern Canada."We have extremely complementary but not overlapping businesses," said Pembina Chief Executive Robert Michaleski during a conference call. "This means we will be able to provide a much greater level of service to our customers."

  • After the deal closes, Pembina will nearly double its market capitalization to almost C$8 billion, making it Canada's third-largest energy infrastructure company after TransCanada Corp. (TRP) and Enbridge Inc. (ENB). It will trade on the New York Stock Exchange as well as in Toronto.A larger company "means more liquidity, critical mass and potentially incremental more market share," BMO Capital Markets pipeline analyst Carl Kirst wrote in a note to clients Monday.Michaleski said the deal will immediately boost Pembina's cash flow per share, increase its annualized dividend by 4% to C$1.62 and reduce its dividend payout ratio.On closing, the combined company - which will retain the Pembina name - will be led by Michaleski, and a combination of the executive teams of both companies.The boards of both companies support the deal and are expected to recommend their shareholders vote in favor of the arrangement.

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