Is Pembina (TSX: PPL) stock a buy as it merges business with KKR?

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Is Pembina (TSX: PPL) stock a buy as it merges business with KKR?

Is Pembina (TSX: PPL) stock a buy as it merges business with KKR?
Image source: © 2022 Kalkine Media Inc 

Highlights 

  • Pembina Pipeline Corporation (TSX: PPL) made headlines on Tuesday, March 1, after it announced its plans to merge some of its assets with KKR & Co, a global investment firm, in Canada.
  • Following this development, the midstream energy company saw its stock clock a new 52-week high of C$ 44.77 during the session.
  • Upon completing this JV deal, Pembina said that it is planning to hike its monthly dividend by 3.6 per cent.

Pembina Pipeline Corporation (TSX: PPL) made headlines on Tuesday, March 1, after it announced its plans to merge some of its assets with KKR & Co, a global investment firm, in Canada.

Following this development, the midstream energy company saw its stock clock a new 52-week high of C$ 44.77 during the session.

Let us have a close look at this merger deal.

Pembina (TSX: PPL) and KKR deal – Key insights

Pembina and KKR said that they have agreed to merge their natural gas processing assets into one entity, Newco, in a C$ 11.4 billion deal (assets under constructions excluded).

Pembina said that it will own 60 per cent of this joint venture (JV) entity, while KKR’s global infrastructure funds will own the remaining 40 per cent.

The Calgary-based energy pipeline company will operate and manage Newco, as per the release. This deal also includes the Veresen Midstream and Energy Transfer Canada (ETC) businesses.

Also read: Is BMO stock a buy as Bank of Montreal’s profit swells 45% YoY in Q1?

Pembina presently has a 45 per cent ownership stake in Veresen, while KKR, through funds, holds a 55 per cent stake. KKR also owns 49 per cent interest in ETC business via its funds.

The Canadian hydrocarbon transporter added that the resultant new firm will buy the remaining 51 per cent stake in ETC from Energy Transfer LP.  

 Is Pembina (TSX: PPL) stock a buy as it merges business with KKR?

Image source: © 2022 Kalkine Media Inc  

Pembina’s financial performance in Q4 FY2021

Pembina recorded C$ 1.08 billion in net revenue in Q4 FY2021 compared to C$ 954 million a year ago. Its fourth-quarter profit grew substantially to C$ 90 million in 2021 against a net loss of C$ 1.21 billion a year ago.

The C$ 24-billion market cap company is set to pay a monthly dividend of C$ 0.21 per share on March 15.

Pembina’s stock performance

Pembina stock closed at C$ 44.08 apiece on Tuesday, up by over two per cent, with 3.3 million shares switching hands this day.

The midstream energy stock also shot up by nearly 34 per cent year-over-year (YoY).

Bottomline

Upon completing this JV deal, Pembina said that it is planning to hike its monthly dividend by 3.6 per cent, i.e., 0.0075 apiece. The energy infrastructure company also stated that this merger is expected to provide “greater exposure” to northeast British Columbia (NEBC).

Also read: RY, CM, NA, SLF & GSY: 5 TSX dividend stocks to buy in March

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