ASC Confirms the Pembina Transaction Break Fee
and Allows Inter Pipeline to Maintain its
Shareholder Rights Plan
ASC Rules Brookfield's "Total Return Swap"
Requires Full Disclosure and Increases the Minimum Bid Condition
for Brookfield Bid to 55 Percent
Pembina and Inter Pipeline Urge Shareholders
to Reject the Brookfield Bid and
Vote FOR the Pembina-Inter Pipeline Arrangement
CALGARY, AB, July 13, 2021 /PRNewswire/ -- Pembina Pipeline
Corporation ("Pembina") (TSX: PPL) (NYSE: PBA) today announced that
the Alberta Securities Commission (the "ASC") has dismissed, in its
entirety, Brookfield's application
to terminate Pembina's proposed plan of arrangement with Inter
Pipeline Ltd. ("IPL" or "Inter Pipeline") and has upheld the break
fee that may be paid by IPL to Pembina under that arrangement in
certain circumstances.
The ASC also determined that Brookfield's Total Return Swaps (as defined
below) in connection with Brookfield's hostile take-over bid to acquire
all of the outstanding common shares (the "IPL Shares") of IPL (the
"Brookfield Bid") requires additional disclosure and required that
a higher minimum tender threshold must be satisfied in connection
with Brookfield's bid.
The ASC's decision was provided orally to the parties today,
with written reasons to follow. Details of the ASC decision
in summary are:
Pembina-IPL Arrangement, IPL Shareholder Rights Plan and
Pembina Break Fee
The ASC dismissed, in its entirety, Brookfield's application to cease trade, or
terminate, both the proposed acquisition by Pembina of all of the
Inter Pipeline Shares pursuant to a plan of arrangement of Inter
Pipeline (the "Pembina Arrangement") and Inter Pipeline's
shareholder rights plan (the "Rights Plan"), as well as
Brookfield's application to
restrain the payment by Inter Pipeline to Pembina of the
$350 million break fee payable in
certain circumstances as agreed to by the parties in connection
with the Pembina Arrangement.
As a result, the Rights Plan, which was adopted by Inter
Pipeline on March 31, 2021 and treats
the TRS Shares (as defined below) as beneficially owned by
Brookfield, will remain in place
until after the conclusion of the Inter Pipeline shareholders'
meeting to be held to consider the approval of the Pembina
Arrangement, currently scheduled for July
29, 2021, and will prevent Brookfield from acquiring or controlling over
20% of the Inter Pipeline Shares, including the TRS Shares that
represent approximately 9.9% of the outstanding IPL Shares.
Total Return Swap and Required Disclosure
The ASC ordered that Brookfield
is required to make additional public disclosure, in a formal
amendment to Brookfield's
take-over bid documents, of the material terms of a series of
cash-settled share swap transactions (collectively, the "Total
Return Swap") for approximately 9.9% of the issued and outstanding
common shares of IPL (the "TRS Shares"). The TRS Shares
provided Brookfield with an
economic interest in the common shares of Inter Pipeline (the
"Inter Pipeline Shares") that is in addition to the 9.75% of issued
and outstanding Inter Pipeline Shares that Brookfield and its affiliates had acquired
directly.
The ASC determined that Brookfield's failure to make clear disclosure
of the fact that the swap counterparty was an affiliate of their
financial advisor and other key terms of the Total Return Swaps in
the take-over bid circular filed in respect of the Brookfield Bid
deprived IPL shareholders of material information that was
necessary for them to determine whether to tender their IPL Shares
to the Brookfield Bid.
The ASC ordered that the Brookfield Bid will be subject to a
modified minimum tender condition, such that – instead of the
statutory requirement of 50% – at least 55% of the IPL Shares held
by persons other than Brookfield
and its joint actors must be tendered to the Brookfield Bid in
order for Brookfield to be
permitted to take up any IPL Shares under the bid.
Pembina's President and Chief Executive Officer Mick Dilger added: "We thank the ASC and the
Commissioners for their time and thoughtful decision. With this
decision, Inter Pipeline shareholders have had their rights
protected."
Added Dilger, "Pembina's transaction with Inter Pipeline
represents a unique opportunity to create one of the largest energy
infrastructure companies in North America. We will have an
unrivalled growth profile, an industry leading dividend, a broad
portfolio of assets that have great synergies and systems of scale
in unconventional oil where we have the immediate potential to
unlock further value for shareholders. We strongly recommend
that Pembina and Inter Pipeline shareholders vote in favour of the
merger."
Under the proposed Pembina Arrangement, Pembina would acquire
all of the Inter Pipeline Shares on the basis of 0.5 of a Pembina
common share in exchange for each Inter Pipeline Share. The
IPL Board has unanimously recommended that IPL shareholders support
and vote FOR the strategic Pembina Arrangement, and the Pembina
Board has unanimously recommended that Pembina shareholders also
vote FOR the issuance of the Pembina shares under the Pembina
Arrangement, in each case at shareholder meeting to be held on
July 29, 2021. In addition to
greater immediate value, the Pembina Arrangement is expected to
provide IPL shareholders an immediate 175% increase to their
monthly dividend, significant upside value due to the combined
companies' synergies and accelerated growth outlook, and a tax-free
rollover for taxable Canadian shareholders.
Voting FOR the Pembina Inter Pipeline Transaction
Shareholders are encouraged to vote by proxy deadline in advance
of the July 29, 2021, meeting. If
approved, the Strategic Combination between Pembina and Inter
Pipeline is expected to close late in the third quarter or early in
the fourth quarter of 2021.
YOUR VOTE IS VERY IMPORTANT
REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN.
For more information, visit PembinaIPL.com. Shareholders with
questions or requiring assistance in considering the Strategic
Combination, or with the completion and delivery of their proxy,
should contact Pembina's proxy solicitation agent, Kingsdale
Advisors by telephone at 1-877-657-5859 (416-867-2272 for collect
calls outside North America) or by
email at contactus@kingsdaleadvisors.com.
About Pembina
Pembina is a leading transportation and midstream service
provider that has been serving North
America's energy industry for more than 65 years. Pembina
owns an integrated system of pipelines that transport various
hydrocarbon liquids and natural gas products produced primarily in
western Canada. Pembina also owns
gas gathering and processing facilities; an oil and natural gas
liquids infrastructure and logistics business; and is growing an
export terminals business. Pembina's integrated assets and
commercial operations along the majority of the hydrocarbon value
chain allow it to offer a full spectrum of midstream and marketing
services to the energy sector. Pembina is committed to identifying
additional opportunities to connect hydrocarbon production to new
demand locations through the development of infrastructure that
would extend Pembina's service offering even further along the
hydrocarbon value chain. These new developments will contribute to
ensuring that hydrocarbons produced in the Western Canadian
Sedimentary Basin and the other basins where Pembina operates can
reach the highest value markets throughout the world.
Purpose of Pembina:
To be the leader in delivering integrated infrastructure
solutions connecting global markets:
- Customers choose us first for reliable and value-added
services;
- Investors receive sustainable industry-leading total
returns;
- Employees say we are the 'employer of choice' and value
our safe, respectful, collaborative and fair work culture; and
- Communities welcome us and recognize the net positive
impact of our social and environmental commitment.
Pembina is structured into three Divisions: Pipelines Division,
Facilities Division and Marketing & New Ventures Division.
Pembina's common shares trade on the Toronto and New
York stock exchanges under PPL and PBA, respectively. For
more information, visit www.pembina.com.
Forward-Looking Statements and Information
This document contains certain forward-looking statements and
forward-looking information (collectively, "forward-looking
statements"), including forward-looking statements within the
meaning of the "safe harbor" provisions of applicable securities
legislation, that are based on Pembina's current expectations,
estimates, projections and assumptions in light of its experience
and its perception of historical trends. In some cases,
forward-looking statements can be identified by terminology such as
"expects", "will", "would", "anticipates", "plans", "estimates",
"develop", "intends", "potential", "continue", "could", "create",
and similar expressions suggesting future events or future
performance.
In particular, this document contains forward-looking
statements pertaining to, without limitation, the following: the
Pembina Arrangement, including the anticipated benefits thereof to
IPL's shareholders, both generally and relative to the Brookfield
Bid; the expected size, efficiency, valuation, project certainty
and capacity of the combined company; the combined company's
capacity and opportunities to expand and pursue and develop new
projects and investments; future dividends, including increases in
the amounts thereof, which may be declared on Pembina's common
shares on any future dividend payment date; the anticipated
synergies associated with the Pembina Arrangement; and the expected
Canadian tax treatment of the Pembina Arrangement.
These forward-looking statements are based on certain
assumptions that Pembina has made in respect thereof as at the date
of this news release regarding, among other things: the ability of
Pembina and IPL to satisfy the conditions to closing of the Pembina
Arrangement in a timely manner and on acceptable terms; that
favorable circumstances continue to exist in respect of current
operations and current and future growth projects; the availability
of capital to fund future capital requirements relating to existing
assets and projects; that the combined entities' future results of
operations will be consistent with past performance and management
expectations in relation thereto; oil and gas industry exploration
and development activity levels and the geographic region of such
activity; prevailing regulatory, tax and environmental laws and
regulations; the ability of Pembina to maintain favourable credit
ratings (both before and following the Pembina Arrangement); future
cash flows; prevailing commodity prices, interest rates, carbon
prices, tax rates and exchange rates; future operating costs;
geotechnical and integrity costs; that any required commercial
agreements can be reached; that any third-party projects relating
to Pembina's growth projects will be sanctioned and completed as
expected; that all required regulatory and environmental approvals
can be obtained on the necessary terms in a timely manner; that
counterparties will comply with contracts in a timely manner; that
there are no unforeseen events preventing the performance of
contracts or the completion of the relevant facilities; that there
are no unforeseen material costs relating to the relevant
facilities which are not recoverable from customers; maintenance of
operating margins; the amount of future liabilities relating to
lawsuits and environmental incidents; and the availability of
coverage under Pembina's insurance policies (including in respect
of Pembina's business interruption insurance policy).
Although Pembina believes the expectations and material
factors and assumptions reflected in these forward-looking
statements are reasonable as of the date hereof, there can be no
assurance that these expectations, factors and assumptions will
prove to be correct. These forward-looking statements are not
guarantees of future performance and are subject to a number of
known and unknown risks and uncertainties including, but not
limited to: 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 Pembina Arrangement; that the
proceedings at the ASC are not resolved in favour of IPL and
Pembina; the failure to realize the anticipated benefits or
synergies of the Pembina Arrangement following closing due to
integration issues or otherwise 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; labour and material shortages; material
cost-overruns in respect of the Heartland Petrochemical Complex or
a material delay to the expected in-service date thereof;
non-performance or default by counterparties to agreements which
Pembina or one or more of its affiliates has entered into in
respect of its business; the impact of competitive entities and
pricing; reliance on key relationships and agreements; reliance on
third parties to successfully operate and maintain certain assets;
the strength and operations of the oil and natural gas production
industry and related commodity prices; the continuation or
completion of third-party projects; the regulatory environment and
decisions and Indigenous and landowner consultation requirements;
actions by governmental or regulatory authorities, including
changes in tax laws and treatment, changes in the regulation of
competition in Canada and
elsewhere; changes in royalty rates, climate change initiatives or
policies or increased environmental regulation; fluctuations in
operating results; adverse general economic and market conditions
in Canada, North America and worldwide, including
changes, or prolonged weaknesses, as applicable, in interest rates,
foreign currency exchange rates, commodity prices, supply/demand
trends and overall industry activity levels; risks relating to the
current and potential adverse impacts of the COVID-19 pandemic;
constraints on the, or the unavailability of, adequate
infrastructure; the political environment in North America and elsewhere, and public
opinion; lower than anticipated results of operations and accretion
from Pembina's business initiatives; ability to access various
sources of debt and equity capital; changes in credit ratings;
counterparty credit risk; technology and cyber security risks;
natural catastrophes; and certain other risks detailed from time to
time in Pembina's public disclosure documents available at
www.sedar.com, www.sec.gov and through Pembina's website at
www.pembina.com and in Inter Pipeline's public disclosure documents
available at www.sedar.com and through Inter Pipeline's website at
www.interpipeline.com. In addition, the closing of the Pembina
Arrangement may not be completed, or may be delayed if the parties'
respective conditions to the closing of the Pembina Arrangement,
including the timely receipt of all necessary regulatory approvals,
are not satisfied on the anticipated timelines or at all.
Accordingly, there is a risk that the Pembina Arrangement will not
be completed within the anticipated time, on the terms currently
proposed or at all.
This list of risk factors should not be construed as
exhaustive. Readers are cautioned that events or circumstances
could cause results to differ materially from those predicted,
forecasted or projected. The forward-looking statements contained
in this document speak only as of the date of this document.
Pembina does not undertake any obligation to publicly update or
revise any forward-looking statements or information contained
herein, except as required by applicable laws. The forward-looking
statements contained in this document are expressly qualified by
this cautionary statement.
For further information: Investor Relations: Cameron Goldade, Vice President, Capital
Markets, (403) 231-3156, 1-855-880-7404, e-mail:
investor-relations@pembina.com, www.pembina.com; Media Relations:
(403) 691-7601, media@pembina.com