Pembina Pipeline and KKR have agreed to combine their western Canadian natural gas processing assets to establish a new joint venture (JV) in a deal valued up to $11.4bn.

Under the deal, Pembina will own 60% stake in the new JV, while the remaining 40% interest will be held by KKR’s global infrastructure funds. The new JV will be operated and managed by Pembina.

The resources covered under the transaction include Pembina’s field-based natural gas processing assets and Veresen Midstream business, as well as the business currently carried on by Energy Transfer Canada (ETC).

Currently, KKR owns 55% stake in Veresen Midstream business, while the remaining 45% interest is owned by Pembina. The funds managed by KKR own 49% stake in the ETC.

Simultaneously with closing of the JV transaction, the new JV entity will also purchase Energy Transfer’s remaining 51% stake in ETC.

KKR North American infrastructure head and partner Brandon Freiman said: “We have developed a great, trusted relationship with Scott, Jaret and the industry-leading team at Pembina and we are thrilled to be deepening that partnership with today’s strategic combination.”

Pembina will support the new JV’s field-based gas processing assets, including Cutbank complex, Saturn complex, Resthaven facility, Duvernay complex and Saskatchewan ethane extraction plant, as well as the Veresen Midstream.

Empress, Younger and Burstall assets, which are owned by Pembina, are not part of the transaction. The company will hold its current ownership interest in the assets.

Pembina president and CEO Scott Burrows said: “We work well together and share a mutual desire to invest capital and generate attractive returns. The formation of this new joint venture is a natural extension of our relationship, unlocks value for Pembina and creates another growth platform.”

Upon closing, Pembina anticipates to receive up to $700m in after-tax cash proceeds and $550m for debt repayment, as well as $150m for additional common share repurchases.

Subject to approval under the Competition Act (Canada) and other customary closing conditions, the deal is expected to be completed in the second quarter or third quarter of this year.