For a $10B company, a $5B+ deal is a very big bet. KEY is buying Plains Canadian NGL businesses, plus some US assets, significantly expanding KEY's liquids infrastructure platform across Eastern and Western Canada. The acquisition includes large scale extraction and fractionation assets, storage and pipelines. It is accretive to cash flow to KEY in the first year, in the 'mid teens percentage' range. 70% of the acquisiton's margins comes from fees. KEY says it supports its dividend and its dividend growth and payout plan (payout ratio) remain strong. There is at least $100M in synergies. KEY is doing a very large $1.8B bought deal (reciepts) to finance part of the deal. We think the deal rationale makes sense. The stock will take a hit though on the deal risk, size, new debt and the fairly large discount on the equity issue. But we think it is the right move overall, but does add integration risks. This has to go well for the company.
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