Calgary-based oil and gas producer Pembina Pipeline said on Monday that it has agreed to buy Canadian rival Provident Energy (PVX) for about $3.18 billion in a deal it hopes will boost its position in the North American energy sector.
The combined company will have a market capitalization of $7.9 billion and total enterprise value of $10 billion, making it one of the largest publicly traded energy infrastructure companies in Canada.
The proposed deal would combine Pembina’s energy transportation and gas processing business with Provident’s portfolio of natural gas liquids extraction, fractionation, storage, transportation and logistics.
“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 CEO Bob Michaleski said in a statement.
Both company’s boards of directors have unanimously approved the agreement and recommend shareholders vote in favor of the transaction. The deal is slated to close later this year, pending regulatory approvals and customary closing conditions.
Under the deal, Provident shareholders will receive 0.425 Pembina shares for each of their Provident shares, representing a premium of about 24.7% to its closing price on Jan. 13.
As a reflection of its “confidence in the significant operational and financial strength of the combined entity going forward,” Pembina said it intends to increase its monthly dividend rate to 13.5 cents a share from 13 cents, an increase of 3.8%, following the deal’s consummation.
The company also plans at that time to start development on a new 65,000-barrel-a-day fractionator at Provident’s Redwater site, which it says will meet growing demand from producers drilling for liquids-rich natural gas in Western Canada.
The site is expected to be in service by mid-2014, pending regulatory and environmental approvals.