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Pembina reinforces proposal targeted at strategic combination with Inter

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Pembina Pipeline Corporation has reinforced its view of the substantial value opportunity for shareholders of Inter Pipeline Ltd. through the board-supported strategic combination with Pembina. Pembina also cautioned Inter Pipeline shareholders not to tender their shares to Brookfield Infrastructure Partners L.P.'s 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.
  • 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.

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