MOSCOW (MRC) -- SemGroup Corporation and KKR announced they have formed a joint venture to create a Canadian midstream infrastructure platform, SemCAMS Midstream ULC (SemCAMS Midstream), said the company.
The companies also announced that SemCAMS Midstream has entered into a definitive agreement to acquire Meritage Midstream ULC and its midstream infrastructure assets for CD600 million (USD449 million).
Under the terms of the joint venture, SemGroup will contribute the shares and assets of its Canadian subsidiary, SemCAMS, valued at CD1.15 billion (USD860 million), in exchange for CD615 million (USD460 million) cash proceeds and 51% common equity ownership in SemCAMS Midstream. KKR will contribute CD515 million (USD385 million) of cash in exchange for 49% of the common equity ownership. KKR will also contribute CD300 million (USD224 million) to acquire perpetual preferred equity. In addition, the joint venture will enter into a CD800 million (USD598 million) underwritten bank credit facility.
The transactions create a well-capitalized Canadian growth platform and expand SemGroup’s Montney footprint while deleveraging and strengthening its capital position. The joint venture positions SemCAMS Midstream for future growth opportunities.
Carlin G. Conner, Chief Executive Officer of SemGroup, said, “This transaction captures an attractive valuation for our SemCAMS business and accelerates our Canadian strategy in one of North America's premier energy basins. The acquisition of Meritage enables SemCAMS Midstream to expand and optimize its portfolio of assets, broaden its service offerings and create a more attractive Canadian growth platform. In addition, it delivers on our commitment to strengthen our balance sheet. We are pleased to partner with KKR, an industry-leading investor with extensive experience in the energy sector."
Brandon Freiman, Member and Head of North American Infrastructure at KKR, said, "We have been an active investor in the Canadian energy space for the last decade and are big believers in the Montney as a growing, low-cost natural gas play that is relevant on a global scale. The combination of the highly complementary SemCAMS and Meritage businesses creates a leading midstream platform in the core of the Alberta Montney that is well-positioned to serve its growing infrastructure needs. We are thrilled to be partnering with SemGroup and the SemCAMS management team to build a nimble, well capitalized, customer-focused midstream business together in Western Canada in the coming years."
Dave Gosse, President of SemCAMS Midstream, added, “Combining the SemCAMS and Meritage portfolios will diversify our customer base and broaden our service offerings to include oil batteries and liquids processing, while considerably expanding our gas processing capacity. Our contiguous asset mix, geographic proximity and operational leverage will allow us to optimize our system while creating increased reliability. This acquisition complements our competitive advantages, including our unique, flexible assets that now include additional infrastructure in a top quartile producing basin. Partnering with KKR will further enhance our ability to execute on our growth strategy and our focus on being the midstream provider of choice for area producers."