Cautions Inter Pipeline shareholders not to tender their
shares to
Brookfield's opportunistic,
hostile offer that would deny them significant
potential upside value and creates tax exposure
All financial figures are approximate and presented in
Canadian dollars unless otherwise noted. This news release refers
to adjusted earnings before interest, taxes, depreciation and
amortization ("adjusted EBITDA"), and adjusted cash flow from
operating activities ("adjusted cash flow"), which are financial
measures that are not defined by Generally Accepted Accounting
Principles ("GAAP"). For more information about these metrics, see
"Non-GAAP Measures" herein.
CALGARY, AB, June 7, 2021 /PRNewswire/ -- Pembina Pipeline
Corporation ("Pembina") (TSX: PPL) (NYSE: PBA) today reinforced its
view of the substantial value opportunity for shareholders of Inter
Pipeline Ltd. ("Inter Pipeline") (TSX: IPL) through the
board-supported strategic combination with Pembina (the "Strategic
Combination"). Pembina also cautioned Inter Pipeline shareholders
not to tender their shares to Brookfield Infrastructure
Partners L.P.'s ("Brookfield")
opportunistic, hostile offer that would deny them the significant
potential upside of a combined company, while also creating tax
exposure.
Pembina's President and Chief Executive Officer, Mick Dilger said, "Along with the Inter Pipeline
Board of Directors, we are very excited about this opportunity to
combine our companies and create one of the largest infrastructure
companies in Canada, with vast
potential to further benefit all of our collective stakeholders.
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."
Added Dilger, "I am also overwhelmed by the support I have
received regarding the combination from community leaders, First
Nations leaders, employees, shareholders, customers and other
industry participants alike. I believe this support comes from our
long-standing relationships and the work we have done together to
build Pembina to what it is today. We have had the privilege of
starting as a family business 65 years ago and over the last decade
growing the company from a few hundred people to over 2,500
employees. I am excited to continue this path of job creation and
enhancing the Pembina and Inter Pipeline communities, where we work
and live, upon the successful consummation of the combination."
Under the Strategic Combination, Inter Pipeline shareholders
will receive 0.5 shares of Pembina for each share of Inter
Pipeline. This represents value of $19.45 per share, or a 45 percent premium to the
unaffected price of Inter Pipeline shares[1], based on the closing
price of Pembina's common shares on May 31,
2021. The Strategic Combination represents a straightforward
offer that provides Inter Pipeline shareholders immediate value
with greater upside than the opportunistic and complex Brookfield offer, given the potential high tax
impact, and 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.
Further, Inter Pipeline shareholders stand to realize
significant benefits and upside value from the Strategic
Combination:
- World-Class, Liquid Investment: As shareholders of
Pembina, Inter Pipeline shareholders 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. Over the past three months, the average daily value of
Pembina shares traded was $185
million. Pembina has generated a 210 percent total return
for its shareholders since the beginning of 2011, which leads the
Canadian energy infrastructure peer group.
- Immediate Dividend Increase: Upon closing, Inter
Pipeline 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
("HPC"). By comparison, Inter Pipeline shareholders who elect to
receive class A exchangeable shares of Brookfield Infrastructure
Corporation ("BIPC") will see only a modest 15 percent increase in
their per share dividend, and Canadian residents will also be
subject to currency exposure on each dividend payment as dividends
on BIPC shares are paid in U.S. dollars.
- Synergies: Inter Pipeline shareholders will share in the
$150 to $200
million of anticipated near-term annual synergies of the
combined company, which are expected to immediately contribute to
meaningful adjusted cash flow from operating activities per share
accretion and share price appreciation upon closing of the
Strategic Combination.
- Extensive Growth Opportunities and Job Creation: The
combined company has visible, accretive and highly probable
unsanctioned investment opportunities in excess of $6 billion, and the Strategic Combination will
accelerate and de-risk these opportunities. The investment
opportunities also represent meaningful job creation. Pembina is in
advanced stages on a number of its proprietary growth opportunities
and expects to make further announcements in the coming weeks.
Additionally, upon closing of the Strategic Combination, there are
$450 million of readily actionable
projects, which alone could generate approximately $100 million of incremental adjusted EBITDA.
- Participation in Upside of Heartland Petrochemical
Complex: As continuing owners of the combined company,
Inter Pipeline shareholders will benefit from the expected
long-term upside of the HPC and synergies with Pembina's natural
gas liquids business.
- Tax-Free Rollover for Taxable Canadian Shareholders
: The Strategic Combination will allow for a fully tax
deferred rollover of Inter Pipeline shares into Pembina shares for
Canadian resident shareholders, which, unlike the cash
consideration to be provided under the Brookfield offer, would not give rise to any
capital gains or losses on Inter Pipeline shares until a
shareholder ultimately disposes of their Pembina shares. U.S.
resident shareholders of Inter Pipeline also may be eligible for a
tax deferred rollover in connection with the Strategic
Combination.
- High Degree of Regulatory Certainty: Pembina has
committed to secure all regulatory approvals, including obtaining
approval under the Competition Act (Canada), as soon as possible. Under the
agreement between Pembina and Inter Pipeline regarding the
Strategic Combination, Pembina has assumed the risk of any
regulatory delay or remedy under the Competition Act
(Canada), which provides a high
degree of certainty for Inter Pipeline shareholders. Pembina has
refined its estimate for closing of the Strategic Combination to
late-Q3 / early-Q4 of 2021.
___________________________________
1 Based on the February 10, 2021 closing price of
$13.40.
|
In contrast, the hostile tender offer from Brookfield would deny Inter Pipeline
shareholders the significant upside potential of the combined
company, including the immediate dividend growth, expected
synergies, and multi-billion dollar organic growth, while
subjecting shareholders to potential tax exposure.
About Pembina
Pembina is a leading transportation and midstream service
provider that has been serving North
America's energy industry for more than 65 years. Pembina
owns an integrated system of pipelines that transport various
hydrocarbon liquids and natural gas products produced primarily in
western Canada. Pembina also owns
gas gathering and processing facilities; an oil and natural gas
liquids infrastructure and logistics business; and is growing an
export terminals business. Pembina's integrated assets and
commercial operations along the majority of the hydrocarbon value
chain allow it to offer a full spectrum of midstream and marketing
services to the energy sector. Pembina is committed to identifying
additional opportunities to connect hydrocarbon production to new
demand locations through the development of infrastructure that
would extend Pembina's service offering even further along the
hydrocarbon value chain. These new developments will contribute to
ensuring that hydrocarbons produced in the Western Canadian
Sedimentary Basin and the other basins where Pembina operates can
reach the highest value markets throughout the world.
Purpose of Pembina:
To be the leader in delivering integrated infrastructure
solutions connecting global markets:
- Customers choose us first for reliable and value-added
services;
- Investors receive sustainable industry-leading total
returns;
- Employees say we are the 'employer of choice' and value
our safe, respectful, collaborative and fair work culture; and
- Communities welcome us and recognize the net positive
impact of our social and environmental commitment.
Pembina is structured into three Divisions: Pipelines Division,
Facilities Division and Marketing & New Ventures Division.
Pembina's common shares trade on the Toronto and New
York stock exchanges under PPL and PBA, respectively. For
more information, visit www.pembina.com.
Forward-Looking Statements and Information
This document contains certain forward-looking statements and
forward-looking information (collectively, "forward-looking
statements"), including forward-looking statements within the
meaning of the "safe harbor" provisions of applicable securities
legislation, that are based on Pembina's current expectations,
estimates, projections and assumptions in light of its experience
and its perception of historical trends. In some cases,
forward-looking statements can be identified by terminology such as
"expects", "will", "would", "anticipates", "plans", "estimates",
"develop", "intends", "potential", "continue", "could", "create",
and similar expressions suggesting future events or future
performance.
In particular, this document contains forward-looking
statements pertaining to, without limitation, the following: the
Strategic Combination, including the anticipated benefits thereof
to Pembina's and Inter Pipeline's respective communities,
customers, securityholders and stakeholders, both generally and, in
relation to Inter Pipeline's securityholders, relative to the
Brookfield Bid; the anticipated timing of closing of the Strategic
Combination; the potential tax impact associated with the
Brookfield bid; the expected size,
efficiency, valuation, project certainty and capacity of
the combined company; the effect of the Strategic
Combination on competition in the industries in which
Pembina and Inter Pipeline do business; the combined company's
capacity and opportunities to expand and pursue and develop new
projects and investments, as well as the anticipated size, timing
and impacts of such projects and investments; the combined
company's ability to create employment opportunities; future
dividends, including increases in the amounts thereof, which may be
declared on Pembina's common shares on any future dividend payment
date; the anticipated synergies associated with the Strategic
Combination (including strategic integration and diversification
opportunities and the accretion to cash flow of Pembina) and the
expected size, sources, timing and effects thereof; the ongoing
utilization and expansions of, and additions to, the combined
company's business and asset base, growth and growth potential;
financial results related to growth and expansion opportunities
associated with the assets of the combined company; the
announcement of proprietary growth opportunities by Pembina; HPC,
including its anticipated impact on the combined company's
financial position and potential future petrochemical projects; the
expected Canadian and U.S. tax treatment of the Strategic
Combination; and the magnitude and allocation of any closing and
regulatory risks associated with the Strategic Combination.
These forward-looking statements are based on certain
assumptions that Pembina has made in respect thereof as at the date
of this news release regarding, among other things: the ability of
the parties to satisfy the conditions to closing of the Strategic
Combination in a timely manner and on acceptable terms; that
favourable circumstances continue to exist in respect of current
operations and current and future growth projects; the availability
of capital to fund future capital requirements relating to existing
assets and projects; that the combined entities' future results of
operations will be consistent with past performance and management
expectations in relation thereto; that HPC will be placed
in-service on time and on budget in accordance with current
expectations; oil and gas industry exploration and
development activity levels and the geographic region of such
activity; prevailing regulatory, tax and environmental
laws and regulations; the ability of the combined
company to maintain favourable credit
ratings; future cash flows; prevailing commodity prices,
interest rates, carbon prices, tax rates and exchange rates; future
operating costs; geotechnical and integrity costs; that any
required commercial agreements can be reached; that any third-party
projects relating to the combined company's growth projects will be
sanctioned and completed as expected; that all required regulatory
and environmental approvals can be obtained on the necessary terms
in a timely manner; that counterparties will comply with contracts
in a timely manner; that there are no unforeseen events preventing
the performance of contracts or the completion of the relevant
facilities; that there are no unforeseen material costs relating to
the relevant facilities which are not recoverable from customers;
maintenance of operating margins; the amount of future liabilities
relating to lawsuits and environmental incidents; and the
availability of coverage under Pembina's insurance policies
(including in respect of Pembina's business interruption insurance
policy).
In respect of the forward-looking statements and information
concerning the potential increases in Pembina's dividend following
completion of the Strategic Combination and the successful
commissioning and in-service of HPC, Pembina has provided such in
reliance on certain assumptions that it believes are reasonable at
this time, including assumptions in respect of: prevailing
commodity prices, margins and exchange rates; that the combined
entities future results of operations will be consistent with past
performance and management expectations in relation thereto; the
continued availability of capital at attractive prices to fund
future capital requirements relating to existing assets and
projects, including but not limited to future capital expenditures
relating to expansion, upgrades and maintenance shutdowns; the
success of growth projects, including HPC; future operating costs;
that counterparties to material agreements will continue to perform
in a timely manner; that there are no unforeseen events preventing
the performance of contracts; and that there are no unforeseen
material construction or other costs related to current growth
projects or current operations. Pembina will also be subject to
corporate legal requirements in respect of declaring dividends at
such time.
Although Pembina believes the expectations and material
factors and assumptions reflected in these forward-looking
statements are reasonable as of the date hereof, there can be no
assurance that these expectations, factors and assumptions will
prove to be correct. These forward-looking statements are not
guarantees of future performance and are subject to a number of
known and unknown risks and uncertainties including, but not
limited to: the ability of the parties to receive, in a timely
manner, the necessary regulatory, court, securityholder, stock
exchange and other third-party approvals, including but not limited
to the receipt of applicable competition approvals; the ability of
the parties to satisfy, in a timely manner, the other conditions to
the closing of the Strategic Combination; the failure to realize
the anticipated benefits or synergies of the Strategic Combination
following closing due to integration issues or otherwise and
expectations and assumptions concerning, among other things:
customer demand for the combined company's services; commodity
prices and interest and foreign exchange rates; planned synergies,
capital efficiencies and cost-savings; applicable tax laws; future
production rates; the sufficiency of budgeted capital expenditures
in carrying out planned activities; labour and material shortages;
material cost-overruns in respect of HPC or a material delay to the
expected in-service date for HPC; non-performance or default by
counterparties to agreements which Pembina or one or more of
its affiliates has entered into in respect of its business; the
impact of competitive entities and pricing; reliance on key
relationships and agreements; reliance on third parties
to successfully operate and maintain certain assets; the
strength and operations of the oil and natural gas production
industry and related commodity prices; the continuation or
completion of third-party projects; the regulatory environment
and decisions and Indigenous and landowner consultation
requirements; actions by governmental or regulatory authorities,
including changes in tax laws and treatment, changes in the
regulation of competition in Canada and elsewhere; changes in royalty
rates, climate change initiatives or policies or increased
environmental regulation; fluctuations in operating results;
adverse general economic and market conditions
in Canada, North America and worldwide, including
changes, or prolonged weaknesses, as applicable, in
interest rates, foreign currency exchange rates, commodity
prices, supply/demand trends and overall industry activity levels;
risks relating to the current and potential adverse impacts of
the COVID-19 pandemic; constraints on the, or the unavailability
of, adequate infrastructure; the political environment in North
America and elsewhere, and public opinion; lower than
anticipated results of operations and accretion from Pembina's
business initiatives; ability to access various sources of debt and
equity capital; changes in credit ratings; counterparty credit
risk; technology and cyber security risks; natural catastrophes;
and certain other risks detailed from time to time in Pembina's
public disclosure documents available
at www.sedar.com, www.sec.gov and through Pembina's
website at www.pembina.com and in Inter Pipeline's public
disclosure documents available at www.sedar.com and
through Inter Pipeline's website at www.interpipeline.com. In
addition, the closing of the Strategic Combination may not be
completed, or may be delayed if the parties' respective conditions
to the closing of the Strategic Combination, including the timely
receipt of all necessary regulatory approvals, are not satisfied on
the anticipated timelines or at all. Accordingly, there is a risk
that the Strategic Combination will not be completed within the
anticipated time, on the terms currently proposed or at
all.
This list of risk factors should not be construed as
exhaustive. Readers are cautioned that events or circumstances
could cause results to differ materially from those predicted,
forecasted or projected. The forward-looking statements contained
in this document speak only as of the date of this document.
Pembina does not undertake any obligation to publicly update
or revise any forward-looking statements or information contained
herein, except as required by applicable laws. The
forward-looking statements contained in this document are
expressly qualified by this cautionary statement.
Non-GAAP Measures
In this news release, Pembina has used the terms adjusted
earnings before interest, taxes, depreciation and amortization
(adjusted EBITDA) and adjusted cash flow from operating activities,
which do not have any standardized meaning under International
Financial Reporting Standards ("IFRS"). Since these non-GAAP
financial measures do not have a standardized meaning prescribed by
GAAP and are therefore unlikely to be comparable to similar
measures presented by other companies, securities regulations
require that these non-GAAP financial measures be clearly defined,
qualified and reconciled to their most directly comparable GAAP
measure. These non-GAAP measures are calculated and disclosed on a
consistent basis from period to period.
Specific adjusting items may only be relevant in certain
periods. The intent of these non-GAAP measures is to provide
additional useful information respecting Pembina's financial and
operational performance to investors and analysts and the measures
do not have any standardized meaning under IFRS. The measures
should not, therefore, be considered in isolation or used in
substitute for measures of performance prepared in accordance with
IFRS.
Other issuers may calculate these non-GAAP measures
differently. Investors should be cautioned that these measures
should not be construed as alternatives to earnings, cash flow from
operating activities or other measures of financial results
determined in accordance with GAAP as an indicator of Pembina's
performance. For additional information regarding non-GAAP
measures, other than as described herein, including reconciliations
to the most directly comparable measures recognized by GAAP, please
refer to Pembina's management's discussion and analysis for the
three months ended March 31, 2021,
which is available online at www.sedar.com, www.sec.gov and through
Pembina's website at www.pembina.com.
Investor Relations: Cam Goldade,
Vice President, Capital Markets, (403) 231-3156, 1-855-880-7404,
e-mail: investor-relations@pembina.com, www.pembina.com; Media
Relations: (403) 691-7601, media@pembina.com