(All financial figures are approximate and in Canadian dollars
unless otherwise noted.)
CALGARY,
Jan. 16, 2012 /PRNewswire/ - Pembina
Pipeline Corporation (TSX: PPL, PPL.DB.C) ("Pembina") and Provident
Energy Ltd. (TSX: PVE, PVE.DB.E, PVE.DB.F, NYSE: PVX) ("Provident")
are pleased to announce they have entered into an agreement (the
"Arrangement Agreement") for Pembina to acquire all of the issued
and outstanding common shares of Provident (the "Provident Shares")
by way of a plan of arrangement under the Business Corporations Act
(Alberta) (the "Arrangement") to
create an integrated company that will be a leading player in the
North American energy infrastructure sector. Upon the successful
completion of this transaction Pembina intends to increase its
monthly dividend rate from $0.13 per
share per month (or $1.56 annualized)
to $0.135 per share per month (or
$1.62 annualized) representing a 3.8%
increase and reflecting management's confidence in the significant
operational and financial strength of the combined entity going
forward.
Transaction Description
Under the terms of the Arrangement Agreement,
Provident shareholders will receive 0.425 of a Pembina share for
each Provident share held (the "Provident Exchange Ratio"). Based
on the January 13, 2012 TSX closing
share price of Pembina of $27.90, the
Provident Exchange Ratio represents a premium of 24.7% to
Provident's closing TSX share price on January 13, 2012 of $9.51. Based on the 20-day weighted average TSX
share price of Pembina of $29.11, the
Provident Exchange Ratio represents a premium of 26.2% to
Provident's 20-day weighted average TSX share price of $9.80. The proposed transaction is expected to
immediately increase Pembina's cash flow per share, increase its
dividends per share and reduce its dividend payout ratio. After
completion of the proposed transaction the combined assets and
employees will operate under the Pembina name and will be led by a
combination of Pembina's and Provident's executive team.
Under the Arrangement Agreement, Pembina will
also assume all of the rights and obligations of Provident relating
to: (i) the 5.75% convertible unsecured subordinated debentures of
Provident maturing December 31, 2017,
and (ii) the 5.75% convertible unsecured subordinated debentures of
Provident maturing December 31, 2018
(collectively, the "Provident Debentures"). The conversion price of
each class of Provident Debentures will be adjusted pursuant to the
terms of the trust indenture governing the Provident Debentures
based on the Provident Exchange Ratio. Following closing of
the transaction, Pembina intends to make an offer for the Provident
Debentures at 100 percent of their principal values plus accrued
and unpaid interest. The repurchase offer will be made within 30
days of closing of the proposed transaction. Should a holder of the
Provident Debentures elect not to accept the repurchase offer, the
debentures will mature as originally set out in their respective
indentures. Holders who convert their Provident Debentures
following completion of the Arrangement will receive common shares
of Pembina.
In addition, Provident will immediately suspend its
premium dividend reinvestment plan and dividend reinvestment
plan.
The Combined Entity
Based on the Provident Exchange Ratio and
Pembina's share price quoted above, 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.
"Provident's assets, employees, customers and
growth projects are an outstanding fit for Pembina," said
Bob Michaleski, President and Chief
Executive Officer of Pembina. "The proposed transaction integrates
our energy transportation and gas processing businesses with
Provident's suite of services including natural gas liquids (NGL)
extraction, fractionation, storage, transportation and logistics,
and will significantly accelerate our growth capital plans for
these business segments. 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."
"This is a logical transaction that leverages
off Provident's strong growth as a pure play midstream business,"
said Doug Haughey, President and
Chief Executive Officer of Provident. "It generates substantial
value for Provident shareholders and brings together two
organizations with complementary strategies and assets. The
result will be one of the strongest energy infrastructure players
in Canada. Provident's
shareholders will participate in a larger entity that has the
capability to pursue larger and more complex growth projects, has
exposure to more elements of the energy infrastructure value chain,
and offers greater liquidity and presence in the capital markets.
Based on Pembina's current dividend rate and the Provident Exchange
Ratio, Provident's shareholders will receive an increase in
dividends per share relative to Provident's current dividend."
Benefits of the Combination
The proposed transaction is expected to provide
Pembina shareholders with an increase in cash flow per share,
increased dividends per share and reduce Pembina's payout ratio,
while giving Provident shareholders a significant premium and a
27.5% increase in monthly cash dividends on a per share basis after
taking into account the Provident Exchange Ratio (compared to the
level of dividends currently received by Provident
Shareholders).
The combined entity will create one of the
largest publicly traded energy infrastructure companies in
Canada, offering the following
benefits for shareholders of both Pembina and Provident:
- Scale and Scope: A substantially larger, and more
diversified portfolio of businesses across the energy
infrastructure value chain;
- Complete Value Chain: A highly integrated suite of
services being offered to customers through the combination of
Pembina's liquids transportation, gas services, and midstream and
marketing segments and Provident's capabilities in NGL extraction,
fractionation, storage, transportation and logistics permitting
both a diversification of business and strengthening the value
proposition for its shareholders and customers;
- Key Growth Areas: Extensive energy infrastructure
businesses located in key growth regions including: Montney, Duvernay, Alberta Deep Basin, Pelican Lake
heavy oil, Athabasca oil sands,
Cardium, Swan Hills, Bakken,
Marcellus and Utica;
- Expanded Footprint: Greater access to NGL barrels
as well as increased capability to store, process and market
barrels across key North America
hubs including Edmonton,
Sarnia and Mont Belvieu. The pro
forma company will have operations in key market areas for NGL and
crude oil in close proximity to pipelines, rail and truck
facilities, storage, fractionation, petrochemical and refining
customers;
- Strong Leadership Team: An experienced management
team with a strong focus on being a responsible, reliable operator
and a trusted member of the community;
- Substantial Growth Opportunities: A larger entity
capable of pursuing more complex growth projects at an accelerated
pace including an aggregate capital program of approximately
$700 million of announced spending in
2012 (Pembina: $550 million,
Provident: $150 million). Major
near-term projects include:
-
- Saturn and Resthaven liquids extraction facilities;
- Peace NGL pipeline expansion;
- Redwater liquids storage
development;
- Redwater fractionator capacity
expansion;
- Strong Synergies: The combined entities will
generate substantial synergies:
-
- The ability to leverage technical, commercial and operational
skills from both Pembina and Provident over the combined asset
base, achieving cost savings and operating efficiencies;
- Synergies that will be realized by more fully connecting,
integrating and utilizing the current and future asset bases of
both companies;
- Corporate cost synergies through the consolidation of head
offices, the decrease of Provident debt service costs, and the
elimination of costs associated with Provident's public company
costs;
- Capital efficiencies through the allocation of capital
expenditures to the highest return projects.
- Superior Financial Platform: The pro forma company
will generate a diversified stable cash flow stream and enjoy a
very strong balance sheet with pro forma 2011 senior debt to EBITDA
of approximately 2.4x.
Due to the continued success of producers
drilling for liquids rich natural gas and the increase in field
liquids extraction, the amount of NGL being produced in the Western
Canadian Sedimentary Basin has increased significantly. To meet the
growing need of producers in the region, Pembina expects that on
closing of the proposed transaction, it will begin development of a
new 65,000 bpd fractionator at Provident's Redwater site, which is anticipated to be
in-service by mid 2014 pending continued customer support and
subject to required regulatory and environmental approvals.
Canadian and U.S. Tax Considerations for Provident
Shareholders
The Arrangement Agreement has been structured to
allow Provident shareholders to receive Pembina shares generally on
a tax-deferred basis for Canadian income tax purposes. In
addition, the Arrangement Agreement has been structured so that the
Arrangement will qualify as a tax-free transaction for U.S. federal
income tax purposes. If the Arrangement qualifies as a tax-free
transaction, Provident shareholders who receive Pembina shares will
not be required to recognize gain and will not be permitted to
recognize loss. However, there can be no assurance that the U.S.
Internal Revenue Service will not challenge the treatment of the
Arrangement as a tax-free transaction.
About the Transaction
The Boards of Directors of Pembina and Provident
have each unanimously (other than the directors who have recused
themselves from the process of considering the proposed
transaction) approved the Arrangement Agreement and have concluded
that the proposed transaction is in the best interests of Pembina
and Provident, respectively. The Boards of Directors of each
Pembina and Provident are expected to provide written
recommendations that their respective shareholders vote their
shares in favor of the Arrangement (or, in the case of Pembina, the
issuance of Pembina shares in connection with the Arrangement) in
the joint information circular to be prepared and mailed by Pembina
and Provident in connection with the proposed transaction. In
addition, each of the Directors (other than those that have recused
themselves from the process of considering the transaction) and
Executive Officers of Pembina and Provident have agreed to vote
their shares in favor of the proposed transaction.
The proposed transaction will be carried out by
way of a court-approved plan of arrangement and will require the
approval of at least 66 2/3% of holders of Provident Shares
represented in person or by proxy at a special meeting of Provident
shareholders (the "Provident Meeting") to be called to consider the
Arrangement. It is expected that the proposed transaction
will be exempt from the registration requirements of the U.S.
Securities Act of 1933, as amended, pursuant to the court approval
exemption afforded by section 3(a)(10) under that Act. The proposed
transaction is also subject to obtaining the approval of a majority
of the votes cast by the holders of Pembina Shares at a special
meeting of Pembina shareholders (the "Pembina Meeting") to be
called to consider the issuance of Pembina shares in connection
with the proposed transaction. In addition to shareholder and court
approvals, the proposed transaction is subject to applicable
regulatory approvals and the satisfaction of certain other closing
conditions customary in transactions of this nature, including
compliance with the Competition Act (Canada) and the acceptance of the Toronto
Stock Exchange (the "TSX").
Further information regarding the proposed
transaction will be contained in a joint information circular that
Pembina and Provident will prepare, file and mail in due course to
their respective shareholders in connection with the Pembina
Meeting and Provident Meeting. It is expected that the Provident
Meeting and the Pembina Meeting will take place in late March,
2012, with closing expected to occur as soon as possible thereafter
subject to regulatory approval. All shareholders are urged to
read the information circular once it becomes available as it will
contain additional important information concerning the proposed
transaction and the Arrangement.
A copy of the Arrangement Agreement will be filed
on Pembina and Provident's SEDAR profile and will be available for
viewing at www.sedar.com.
Pembina expects to apply to list Pembina shares
issuable under the proposed transaction on the Toronto Stock
Exchange ("TSX") on closing and Pembina will apply to list its
shares on the New York Stock Exchange ("NYSE"). It is anticipated
that the Provident Shares will be delisted from the TSX and the
NYSE following completion of the Arrangement.
Management and Staff
The combined entity will be led by Bob Michaleski, President and Chief Executive
Officer of Pembina, and a combination of Pembina's and Provident's
executive teams. Due to the complementary nature of the businesses,
Pembina plans to make employment offers to substantially all of
Provident's employees.
Board of Directors
Subject to a successful completion of the
proposed transaction, each of Mr. Grant D.
Billing and Mr. Jeffrey T.
Smith, current members of the Provident Board of Directors,
have advised that they will accept positions on the Pembina Board.
Mr. Billing is currently Chairman and formerly CEO of Superior Plus
Corp. Mr. Smith is an independent businessman and is currently a
director of Pace Oil & Gas Ltd. Mr. Billing and Mr. Smith
have extensive experience in operations, finance, mergers and
acquisitions, governance, human resources and compensation, and
environment, health and safety. Mr. Randy
Findlay, currently a director of both Pembina and Provident,
will continue as a director of Pembina.
Advisors
Scotia Waterous Inc. is acting as financial
advisor to Pembina with respect to the proposed transaction. Scotia
Waterous Inc. has advised the Board of Directors of Pembina that it
is of the opinion, as of the date hereof, that the consideration to
be offered to Provident's shareholders pursuant to the proposed
transaction is fair to Pembina's shareholders from a financial
point of view. Blake, Cassels & Graydon LLP is acting as
Canadian legal advisor to Pembina and Paul, Weiss, Rifkind, Wharton
& Garrison LLP is acting as United
States legal advisor to Pembina.
TD Securities Inc. is acting as financial
advisor to Provident with respect to the proposed transaction. The
Board of Directors of Provident have received a verbal opinion from
TD Securities Inc. that the consideration to be paid to the
Provident shareholders is fair from a financial point of view to
the Provident shareholders and that the Arrangement is fair from a
financial point of view to Provident Debentureholders. Norton Rose
Canada LLP is acting as Canadian legal advisor to Provident and
Andrews Kurth LLP and Dorsey and Whitney LLP are acting as
United States legal advisors to
Provident.
Conference Call & Webcast
A conference call and webcast to discuss the
proposed transaction has been scheduled for today, January 16, 2012, at 8:00
AM MT (10:00 AM ET) for
interested investors, analysts, brokers and media
representatives.
The conference call dial-in numbers for
Canada and the U.S. are
1-647-427-7450 or 1-888-231-8191. A recording of the
conference call will be available for replay until January 23, 2012 at 11:59
p.m. ET. To access the replay, please dial either
1-416-849-0833 or 1-855-859-2056 and enter the password
43679009.
A live webcast of the conference call can be
accessed on Pembina's website at www.Pembina.com under Investor
Centre, Presentation & Events, or by entering
http://event.on24.com/r.htm?e=396357&s=1&k=B3214FEB4EF90682F77930394EBC6A16
in your web browser. Shortly after the call, an audio archive will
be posted on the website for 90 days.
About Pembina
Pembina Pipeline Corporation transports crude
oil and natural gas liquids produced in western Canada, owns and operates oil sands pipelines,
and has a growing presence in the midstream and marketing and gas
services sectors. Pembina's common shares and convertible
debentures are traded on the Toronto Stock Exchange under the
symbols PPL and PPL.DB.C respectively.
About Provident
Provident Energy Ltd. is a Calgary-based corporation that owns and
manages a natural gas liquids (NGL) infrastructure and logistics
business. Provident's facilities are strategically located in
Western Canada and in the premium
NGL markets in Eastern Canada and
the U.S. Provident provides monthly cash dividends to its
shareholders and trades on the Toronto Stock Exchange and the New
York Stock Exchange under the symbols PVE,PVE.DB.E,PVE.DB.F and
PVX, respectively.
Forward-Looking Statements &
Information
This press release contains forward-looking
statements and forward-looking information within the meaning of
applicable securities laws and are based on the expectations,
estimates and projections of management of the parties as of the
date of this news release unless otherwise stated. The use of any
of the words "expect", "anticipate", "continue", "estimate",
"objective", "ongoing", "may", "will", "project", "should",
"believe", "plans", "intends" and similar expressions are intended
to identify forward-looking statements or information. More
particularly and without limitation, this press release contains
forward-looking statements and information concerning: the
anticipated benefits of the Arrangement to Provident and its
securityholders and to Pembina and its securityholders, including
anticipated synergies; the timing and anticipated receipt of
required regulatory, court and securityholder approvals for the
transaction; the ability of Provident and Pembina to satisfy the
other conditions to, and to complete, the Arrangement; the
anticipated timing of the mailing of the joint information circular
regarding the Arrangement, the holding of the Provident Meeting and
the Pembina Meeting and the closing of the Arrangement, the listing
of Pembina's shares on the NYSE, and the development and
anticipated in service date of the planned fractionator at
Provident's Redwater site.
In respect of the forward-looking statements and
information concerning the anticipated benefits and completion of
the proposed Arrangement, the anticipated timing for completion of
the Arrangement and the listing of Pembina's shares on the NYSE,
Pembina and Provident have provided such in reliance on certain
assumptions that they believe are reasonable at this time,
including assumptions as to the time required to prepare and mail
securityholder meeting materials, including the required joint
information circular; 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 Arrangement; 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; and the availability and cost of labour and
services. The anticipated dates provided may change for a
number of reasons, including unforeseen delays in preparing meeting
materials, inability to secure necessary securityholder,
regulatory, court or other third party approvals in the time
assumed or the need for additional time to satisfy the other
conditions to the completion of the Arrangement. In respect
of the forward-looking statements and information concerning the
development and anticipated in service date of the planned
fractionator at Provident's Redwater site, Pembina and Provident have
provided such in reliance on certain assumptions that they believe
are reasonable at this time, including assumptions that there are
no unforeseen events preventing or hindering the development of the
fractionator; and that there are no unforeseen construction
complications related thereto the facility. Accordingly, readers
should not place undue reliance on the forward-looking statements
and information contained in this press release. In respect of the
forward-looking statements and information concerning the potential
increase in Pembina's dividend following completion of the
Arrangement, Pembina and Provident have provided such in reliance
on certain assumptions that they believe are reasonable at this
time, including assumptions in respect of: prevailing commodity
prices, margins and exchange rates; that Pembina's and Provident's
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; 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.
Since forward-looking statements and
information address future events and conditions, by their very
nature they involve inherent risks and uncertainties. Actual
results could differ materially from those currently anticipated
due to a number of factors and risks. These include, but are not
limited to the risks associated with the industries in which
Pembina and Provident operate in general such as: operational
risks; delays or changes in plans with respect to growth projects
or capital expenditures; costs and expenses; health, safety and
environmental risks; commodity price, interest rate and exchange
rate fluctuations; environmental risks; competition; failure to
realize the anticipated benefits of the Arrangement and to
successfully integrate Pembina and Provident; ability to access
sufficient capital from internal and external sources; and changes
in legislation, including but not limited to tax laws and
environmental regulations. Risks and uncertainties inherent in the
nature of the Arrangement include the failure of Provident or
Pembina to obtain necessary securityholder, regulatory, court and
other third party approvals, or to otherwise satisfy the conditions
to the Arrangement, in a timely manner, or at all. Failure to
so obtain such approvals, or the failure of Provident or Pembina to
otherwise satisfy the conditions to the Arrangement, may result in
the Arrangement not being completed on the proposed terms, or at
all. In addition, the failure of Provident to comply with the terms
of the Arrangement Agreement may result in Provident being required
to pay a non-completion or other fee to Pembina, the result of
which could have a material adverse effect on Provident's financial
position and results of operations and its ability to fund growth
prospects and current operations.
Readers are cautioned that the foregoing list
of factors is not exhaustive. Additional information on other
factors that could affect the operations or financial results of
the parties, and the combined company, are included in reports on
file with applicable securities regulatory authorities, including
but not limited to; Provident's Annual Information Form for the
year ended December 31, 2010 and
Pembina's Annual Information Form for the year ended December 31, 2010 each of which may be accessed
on Provident's and Pembina's SEDAR profile, respectively, at
www.sedar.com.
The forward-looking statements and
information contained in this press release are made as of the date
hereof and the parties undertake no obligation to update publicly
or revise any forward-looking statements or information, whether as
a result of new information, future events or otherwise, unless so
required by applicable securities laws.
Non-GAAP Measures:
In this news release, the term EBITDA
(earnings before interest, taxes, depreciation and amortization) is
used, which is a term that is not defined by Generally Accepted
Accounting Principles (GAAP). EBITDA is commonly used by
management, investors and creditors in the calculation of ratios
for assessing leverage and financial performance and is calculated
as results from operating activities plus share of profit from
equity accounted investees (before tax) plus depreciation and
amortization (included in operations and general and administrative
expense). Investors should be cautioned that EBITDA should
not be construed as alternatives to net earnings, cash flow from
operating activities or other measures of financial results
determined in accordance with GAAP as an indicator of performance.
Furthermore, non-GAAP measures may not be comparable to similar
measures presented by other issuers.
IRS Circular 230 disclosure:
To ensure compliance with requirements
imposed by the IRS, we inform you that any U.S. federal tax advice
contained in this communication (including any attachments) is not
intended or written to be used, and cannot be used, for the purpose
of (i) avoiding penalties under the Internal Revenue Code or (ii)
promoting, marketing or recommending to another party any
transaction or matter addressed herein.
SOURCE Pembina Pipeline Corporation