CALGARY, AB – 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.
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 firstname.lastname@example.org.
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.