TSX:VSN.DB.B - Post by User
Post by
hawk35on May 01, 2017 9:35pm
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Post# 26190042
TD Waterhouse Likes The Deal
TD Waterhouse Likes The DealComments from TDW today.
Event
PPL has entered into an arrangement agreement to acquire all outstanding shares
of Veresen Inc. (VSN). VSN shareholders will receive either 0.4287 common
shares of PPL or $18.65 in cash, subject to pro-ration based on maximum
share consideration of approximately 99.5 million Pembina common shares and
maximum cash consideration of approximately $1.523 billion. The cash offer
represents an approximate 22% premium to the VSN closing price of $15.23 on
April 28, 2017. The transaction is expected to close in late-Q3/17 or Q4/17, subject
to approvals.
Impact: POSITIVE
Transaction Details:
Based on VSN 2018 consensus estimates, the price
represents a 15.4x EV/EBITDA with implied EV of $9.7 billion. While this is above
the 12.4x PPL was trading at, PPL expects to achieve annual run-rate synergies
of $75-$100 million starting in 2018, with 2019 being the first full year. Factoring
in the estimated synergies, the 2018 EV/EBITDA would be around 13.5x.
Accretive to Cash Flow:
The transaction is expected to be accretive to adjusted
cash flow per share on a run-rate basis beginning in 2018, and a 5.9% dividend
increase is expected following the close of the transaction.
Financing:
PPL noted that the combination would maintain the company's strong
balance sheet, and fall within the financial Guard Rails targeted previously. The
company does not expect any need for a common equity issuance.
Diversifies the Business Model:
Pro-forma the transaction adds diversification
to PPL's geography, hydrocarbon mix, counterparty exposure and operating
margin. Management noted that the added basin and market exposure to PPL's
portfolio, including increased presence in the Bakken, was a key factor in the
decision to combine.
Adds Significant Growth:
The combined entity would result in $6 billion of near-
term secured growth projects, and ~$20 billion in combined unsecured growth
opportunities. The scale of the combined entity would also enable PPL to pursue
larger scale and more complex investments