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Pembina Pipeline, Veresen to Combine in $7.3 Billion Merger

Pembina Pipeline Corp. and Veresen Inc. announced a friendly merger Monday to create a Canadian heavy hitter in natural gas, liquids byproducts and oil processing, transportation and storage.

The deal calls for Pembina to pay a blend of shares and cash to buy Veresen. The transaction, scheduled to close this summer, is valued at C$9.7 billion (US$7.3 billion) including assumption of current corporate debt.

The combination's operations will span gas, byproducts and oil markets in Canada and the United States from Fort St. John in northern British Columbia (BC) to Chicago.

Veresen owns Alliance Pipeline, an export conduit for liquids-rich gas that is currently courting industry support for a potential 30% capacity increase to 2.1 Bcf/d, and its allied Aux Sable byproducts extraction plant near Chicago. In the U.S. the package also includes an investment interest in the 1.5 Bcf/d Ruby Pipeline between the Opal and Malin storage and trading hubs in Wyoming and Oregon.

In the Western Canada Sedimentary Basin, Pembina and Veresen have extensive fee-for-service facilities networks forecast to grow to combined processing capacity of 5.8 Bcf/d in 2018 as a result of C$6 billion (US$4.5 billion) in additions currently under way.

Pembina chairman Randy Findlay, in a statement, called the merger an "ideal opportunity to continue building on our respective low-risk, long-term, fee-for-service business models." Veresen chairman Stephen Mulherin added that "combining these two organizations augments our ability to compete for future investment opportunities."

Like rival Altagas Ltd., which recently grew in the U.S. by buying WGL Holdings for US$4.5 billion, Pembina and Veresen are expanding services for shale gas, liquids and oil development, especially in the prolific Montney, Duvernay and Deep Basin formations in BC and Alberta.

In a joint statement, Pembina and Veresen described their merger as creating "an organization that has enhanced capabilities to progress projects of increasing scale and complexity." The pair vowed they "will pursue an ambitious portfolio...building on track records of safe, on time and on budget project execution and delivery."

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