SemGroup and KKR form Canadian joint venture and acquire Meritage Midstream

January 10, 2019

Torys is representing KKR with a team that includes Derek Flaman, Peter Danner, Amy Maginley and Carleigh Kennedy (corporate/M&A) and Omar Wakil (competition).

On January 10, 2019, SemGroup® Corporation (SemGroup) and KKR announced the formation of a joint venture to create a Canadian midstream infrastructure platform, SemCAMS Midstream ULC (“SemCAMS Midstream”). Under the terms of the joint venture, SemGroup will contribute the shares and assets of its Canadian subsidiary, SemCAMS, valued at C$1.15 billion (US$860 million), in exchange for C$615 million (US$460 million) cash proceeds and 51% common equity ownership in SemCAMS Midstream. KKR Global Infrastructure Investors III and its affiliated investment vehicles will contribute C$815 million (US$609 million) of cash in exchange for 49% of the common equity ownership and C$300 million (US$224 million) of perpetual preferred shares of SemCAMS Midstream, which will pay quarterly dividends at an annual rate of 8.75%. 

The companies also announced that SemCAMS Midstream has signed a definitive agreement to acquire Meritage Midstream ULC and its midstream infrastructure assets for C$600 million (US$449 million). The transaction will be financed with a combination of the funds contributed by KKR Global Infrastructure Investors III and a fully-underwritten SemCAMS Midstream credit facility. 

SemCAMS Midstream’s underwritten credit facility commitment is being provided by a syndicate of banks led by TD Securities, CIBC Capital Markets, BMO Capital Markets, and includes a C$350 million (US$262 million) senior secured amortizing term loan facility and C$450 million (US$336 million) senior secured revolving credit facility. These facilities will be used to fund a portion of the Meritage acquisition, future growth projects and ongoing working capital requirements.

The transaction is expected to close in the first quarter of 2019, subject to customary regulatory approvals and closing conditions.

Meritage Midstream operates a portfolio of approximately 195 MMcf/d of natural gas processing capacity, 101 miles of gas gathering pipelines, 38 miles of oil gathering pipelines and 18 miles of emulsion and gas lift pipelines (Patterson Creek facilities) in the liquids-rich Montney play. Additionally, a 200 MMcf/d gas processing expansion is currently under construction and expected to be in service by third quarter 2019.

SemCAMS is a gathering and processing business which provides midstream solutions for natural gas producers in Western Canada. It is one of Alberta’s largest licensed sour gas processors with Duvernay and Montney facilities located near Whitecourt and Fox Creek, and two plants under construction in the Smoke Lake area and the Wapiti area south of Grand Prairie. The company also operates sweet gas processing facilities in this region.

KKR is a leading global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic partners that manage hedge funds.

SemGroup moves energy across North America through a network of pipelines, processing plants, refinery-connected storage facilities and deep-water marine terminals with import and export capabilities.

Further information can be found on Globe Newswire’s website.

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