Pembina Pipeline pays Dh12bn for Kinder Morgan and Cochin units

Agreement extends Pembina’s “reach into the US through a highly desirable cross-border pipeline", says Mick Dilger, Pembina’s president and chief executive

The Danish bank expects a pick-up in Brent to $40 levels by "autumn" and a revival in demand to 100 million barrels per day by 2021. Reuters

Pembina Pipeline agreed to buy Kinder Morgan’s Canadian unit and the US portion of the Cochin Pipeline system for about C$4.35 billion (Dh12.11bn).

The two deals with Kinder Morgan will give Pembina additional storage and shipping assets across Canada, connected to both conventional and oil-sands regions and major export pipelines. The company sees “substantial opportunities for growth”, according to a statement on Wednesday. The deal values Kinder Morgan Canada at about C$15.02 per share, or about 37 per cent more than the stock’s closing price on Tuesday.

The agreement extends Pembina’s “reach into the US through a highly desirable cross-border pipeline", Mick Dilger, Pembina’s president and chief executive, said in the statement.

For Kinder Morgan, the agreement comes more than three months after its Canadian unit said it would continue as a standalone company. It held two bidding rounds, “but ultimately concluded that a transaction on satisfactory terms was not available at the current time”, Steve Kean, chief executive of both Kinder Morgan and the Canadian unit, told investors on a May conference call.

Before the deals were announced early Wednesday, there was speculation that Kinder Morgan Canada could be a potential buyer for the Trans Mountain pipeline that would run from Alberta to Vancouver. The Canadian government bought the pipeline from Kinder last year but promised to sell it back to a private company after it completes a long-delayed expansion project. Pembina made no mention of Trans Mountain in its statement.

Multiple indigenous groups in Canada have expressed interest in buying a stake in the line and analysts have said the line also might be a good fit for pension funds.

The transaction values Kinder Morgan Canada at about C$2.3bn, or C$15.02 per share, based on an all-share exchange ratio of 0.3068 of a common share of Pembina per KML security, according to the statement. It values Cochin US at about C$2.05bn for cash consideration.