Canadian pipeline operator Pembina Pipeline Corp said on Wednesday it would buy smaller rival Kinder Morgan Canada in a transaction that values it at about $2.3 billion (US$1.73 billion), as deals in the country’s midstream segment heat up.
Last week’s unsolicited bid for Inter Pipeline Ltd. highlighted the potential of Canada’s midstream companies, which own key infrastructure such as gathering pipelines, gas-processing plants and storage tanks, to offer insulation from volatile oil prices.
Though such companies have been in high demand, and reported record second-quarter profits, they are sometimes overlooked, because of the wider energy sector’s problems of congested export channels and low prices.
The all-share deal values Kinder Morgan Canada at about $15.02 per share, representing a premium of 36.8 per cent to the stock’s Tuesday close.
Pembina will acquire assets including the Cochin pipeline System, the Edmonton storage and terminal business and bulk storage business Vancouver Wharves, as part of the Kinder Morgan Canada deal.
The company said it will also buy the U.S. portion of the Cochin pipeline system from Kinder Morgan Inc. for about $2.05 billion in cash.