Pembina Pipeline Corporation (TSX:PPL) entered into a definitive agreement to acquire Kinder Morgan Canada Limited (TSX:KML) from Kinder Morgan Canada Company, Kinder Morgan Canada Terminals ULC and others for CAD 1.8 billion on August 20, 2019. Under the terms of the agreement, Pembina will acquire all of the issued and outstanding restricted voting shares and special voting shares of Kinder Morgan Canada and all of the class B units of Kinder Morgan Canada Limited Partnership by way of a plan of arrangement under the Business Corporations Act (Alberta). Pembina is offering to acquire each of the outstanding Restricted Voting Shares and each Class B Unit in exchange for 0.3068 of a common share of Pembina. The holders of KML special voting will receive a cash amount equal to CAD 0.000001. Pembina is assuming CAD 550 million of Kinder Morgan's preferred shares. In a related transaction, Pembina has agreed to purchase the U.S. portion of the Cochin Pipeline from Kinder Morgan, Inc. (NYSE:KMI) for $1.5 billion (CAD 2.1 billion) in cash. The arrangement agreement provides for the payment by KML of a CAD 90 million termination fee if the arrangement agreement is terminated in certain specified circumstances. The arrangement agreement also provides for the payment by Pembina of a reverse termination fee of CAD 90 million. The funding of the transaction is roughly 48% equity, 52% debt.

The employees of Kinder Morgan Canada will be transitioning to Pembina. As of September 10, 2019, Pembina Pipeline and Kinder Morgan agreed to amend and restate the previously announced agreement which were dated August 20, 2019, which include the preferred shares of KML in the arrangement transaction pursuant to which Pembina will acquire KML. The proposed transaction will be subject to a number of closing conditions, including approval of at least 66 2/3% of holders of KML restricted voting shares and special voting shares, voting together as a single class, and the majority of holders of KML restricted voting shares, excluding the votes of those persons whose votes are required to be excluded under MI 61-101 and the Court of Queen's Bench of Alberta, as well as certain regulatory approvals and other customary closing conditions. Completion of the transaction is also subject to approval under the Competition Act and the Canada Transportation Act, as well as acceptance of the Toronto Stock Exchange. In addition, the transaction is subject to concurrent completion of the sale of the U.S.-regulated Cochin pipeline system by KMI to Pembina, conditional approval to the listing of the Pembina Common Shares issuable, KML and KMI shall have entered into the Transition Services Agreement. Holders of less than 50% of the outstanding KML Restricted Voting Shares shall have validly exercised Dissent Rights.

The KML special committee, which is composed of KML's Directors, unanimously recommended the Pembina proposal to the KML board and the full KML board recommends that KML shareholders approve the transaction. In addition, KMI has agreed to vote its shares in favor of the transaction. The transaction has been unanimously approved by the Board of Directors of Pembina. As of October 16, 2019, Kinder Morgan Canada Limited announced that it has received early termination from the U.S. Federal Trade Commission pursuant to the Hart-Scott-Rodino Act. The Minister of Transport approved the transaction on October 23, 2019. The KML shareholder meeting to approve the transaction is scheduled for December 10, 2019. As of November 20, 2019, the parties have received a “no-action letter” from the Canadian Competition Bureau confirming that the Commissioner of Competition does not intend to challenge the transaction. As of November 26, 2019, independent proxy advisory firms, namely, Institutional Shareholder Services Inc. and Glass Lewis & Co., recommended that the holders of KML's restricted voting shares and special voting shares vote in favor of the transaction. As on December 10, 2019, the transaction was approved by the shareholders of Kinder Morgan and also the transaction received final order from the Court of Queens Bench of Alberta approving the arrangement. As of August 22, 2019, the transaction is expected to close during the fourth quarter of 2019 or the first quarter of 2020. As of November 20, 2019, the transaction is expected to close in December 2019. As on December 10, 2019, the transaction is expected to complete on or about December 16, 2019. The proceeds of the sale will allow Kinder Morgan to pay down debt and give it the flexibility to buy back shares, invest in new projects or both. The transaction will be immediately accretive to adjusted cash flow per share and increases Pembina's fee-for-service and take-or-pay component of adjusted EBITDA.

J.P. Morgan acted as financial advisor to KML, BMO Capital Markets acted as financial advisor and fairness opinion provider to the KML special committee. Mungo Hardwicke-Brown and David Tupper and Olga Kary of Blake, Cassels & Graydon LLP acted as legal advisor to KML. Robert Vaux and Jamie van Diepen of Goodmans LLP acted as legal advisors to the KML special committee. TD Securities Inc. acted as financial advisor and fairness opinion provider and Christopher Nixon, Chrysten Perry and Fred Erickson of Stikeman Elliott LLP and Christopher Cross, Jesse Myers, Tim Fenn, Bradd Williamson, Eugene Elrod, Joel Mack, Steven Betensky, Les Carnegie, Jason Cruise, Patrick English, Trevor Wommack, Rachel Bates and Paul Dudek of Latham & Watkins LLP acted as legal advisors to Pembina. W. Cleland Dade, Lytch T. Gutmann, Rebecca L. Baker, Heather L. Brown, Troy L. Harder, Jason M. Jean, Steven J. Lorch, D. Kirk Morgan II, Aaron P. Roffwarg, Scott C. Sanders and Timothy A. Wilkins of Bracewell LLP acted as legal advisors to KML and KMI, parent of Kinder Morgan Canada Company and Kinder Morgan Canada Terminals ULC. BMO Capital Markets acted as financial advisor to the KML Independent Committee. J.P. Morgan Securities Canada Inc. acted as financial advisor to KML. Kingsdale Advisors acted as proxy solicitor for KML against a fee of CAD 0.125 million plus additional out- of- pocket expenses. Kingsdale Advisors is entitled to an additional CAD 0.075 million if voting shareholders approve the arrangement resolution at the voting shareholders' meeting and an additional CAD 0.03 million if preferred shareholders approve the preferred shareholder resolution at the preferred shareholders' meeting. On August 23, 2019, the Special Committee of Kinder Morgan Canada separately formally engaged BMO Capital Markets as financial advisor to the Special Committee regarding the Preferred Share Consideration and the Kinder Morgan Canada has agreed to pay BMO Capital Markets for its services an aggregate fee of CAD 1 million.

Pembina Pipeline Corporation (TSX:PPL) completed the acquisition of Kinder Morgan Canada Limited (TSX:KML) from Kinder Morgan Canada Company, Kinder Morgan Canada Terminals ULC and others on December 16, 2019. Pembina assumed KML's $500 million existing revolving credit facility and converted it to a non-revolving term loan. Kinder Morgan Canada Limited restricted voting shares and preferred shares will be delisted from the Toronto Stock Exchange within a few trading days following closing.