AltaGas Ltd. says it has agreed to acquire strategic interest in Petrogas Energy Corp., a privately held company with a North American logistics network that produces more than $2.7-billion in annual revenue.
Calgary-based AltaGas said it will initially exchange approximately 2.8 million shares and an unspecified amount of cash for a 25 stake in Petrogas. There’s also a provision for it to buy an additional 25 per cent in Petrogas this year.
The deal will increase AltaGas’s ability to move natural gas liquids and crude oil to markets in the United States and Ontario.
“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,” said AltaGas chairman and CEO David Cornhill.
“Petrogas is a strong fit with our strategy of adding assets that provide energy solutions for our customers.”
AltaGas, which has a market value of about $4.1-billion based in the Thursday stock price, is an energy infrastructure business with a focus on natural gas, power and regulated utilities.
Petrogas has a North American logistics network consisting of over 1,500 rail cars and 24 rail and truck terminals in the several states and provinces.
It has major terminal and storage facilities with rail access in key energy hubs including Fort Saskatchewan, Alta., Sarnia, Ont., Griffith, Ind., Conway, Kan. and Mt. Belvieu, Texas.
The two companies have agreed to enter a natural gas liquids marketing agreement in which Petrogas will buy output from AltaGas-owned processing facilities.
The deemed value of the AltaGas shares, is $35.69 or nearly $100-million, which is above the Thursday closing price of $35 on the Toronto Stock Exchange.
The initial acquisition is expected to close on Oct. 1, 2013, and is subject to customary regulatory approvals, including the approval of the Toronto Stock Exchange.