AltaGas Buys Strategic Interest In Petrogas Energy

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Estimated Price
0MM
Description

To buy a 25% interest in the North American integrated midstream company for shares and cash.

AltaGas Ltd. (TO: ALA) entered into an agreement to acquire a 25% strategic interest in Petrogas Energy Corp., a privately held leading North American integrated midstream company, for 2.8 million shares of AltaGas Ltd. at $35.69, the 20-day volume weighted average price, and cash.

The acquisition is expected to be meaningfully accretive to earnings and cash flow per share.

"Our investment in Petrogas provides strategic alignment with a major North American integrated midstream service provider and brings a unique opportunity to optimize and expand our current midstream assets, increasing our ability to move NGL's and crude oil to meet market demands. It also brings key infrastructure needed to develop our LPG export initiative," David Cornhill, AtlaGas chairman and CEO, said in the release. "Petrogas is a strong fit with our strategy of adding assets that provide energy solutions for our customers."

Petrogas, with annual sales of over $2.7 billion and approximately $750 million in total assets, owns and operates extensive midstream facilities along with a logistics network consisting of over 1,500 rail cars and 24 rail and truck terminals. More specifically, Petrogas has major terminal and storage facilities with rail access in key energy hubs including Fort Saskatchewan, Alberta, Sarnia, Ontario, Griffith, Indiana, Conway, Kansas and Mt. Belvieu, Texas. Combined, Petrogas touches over 100,000 barrels ber day (bbl/d) of crude oil and other products, can store over 4 million barrels through owned and leased storage capacity for crude and other products and has throughput capacity for crude blending in excess of 25,000 bbl/d.

AltaGas and Petrogas have agreed to enter into a NGL marketing arrangement whereby Petrogas will purchase the NGL produced for AltaGas' account at AltaGas-owned processing facilities. The arrangement is expected to increase AltaGas' access to various NGL end use markets and improve optimization of AltaGas' natural gas processing facilities.

The acquisition is expected to close on Oct. 1, and is subject to customary regulatory approvals, including the approval of the Toronto Stock Exchange. AltaGas will continue to maintain its strong balance sheet and financial discipline and its commitment to maintaining an investment grade credit rating.

As part of the purchase agreement, AltaGas has retained a conditional option to purchase directly or indirectly up to an additional 25% interest in Petrogas in 2013. TD Securities Inc. is acting as exclusive financial adviser to AltaGas with respect to the proposed acquisition.

Investment Highlights

  • The acquisition provides a unique opportunity for AltaGas to leverage its infrastructure assets and capture synergies across business activities, unlocking value in our NGL assets;
  • The strategic location of AltaGas' NGL facilities combined with Petrogas' market expertise and infrastructure provide the ability to move NGL in and out of storage and transport to market to meet customer demand;
  • The acquisition supports AltaGas' LPG export initiative and is expected to provide access to additional NGL markets across North America and internationally;
  • The acquisition enhances CNG and LNG trucking opportunities;
  • The acquisition provides expanded growth opportunities for AltaGas; and
  • Petrogas' assets are located in Canada and throughout key energy markets in the United States, providing a good geographic fit with AltaGas' current portfolio of assets.

AltaGas Ltd. is a diversified energy infrastructure company engaged in gas, power, and regulated utilities businesses in Canada, and the northern and western U.S. The company is headquartered in Calgary.