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Investing.com -- Keyera Corp . (TSX:KEY) received a significant endorsement as BMO (TSX:BMO) Capital Markets upgraded the stock to Outperform, raising its price target to C$54 amid optimism over its planned acquisition of Plains All American’s Canadian NGL operations and select U.S. assets. Analyst Ben Pham cited the underperformance of Keyera year-to-date and a compelling relative valuation, calling the C$5.15 billion deal “scale-changing.”
“We are upgrading KEY to Outperform from Market Perform following YTD underperformance (~540bps vs. peers and worst performing), the scale-changing $5.15B NGL Plains acquisition, and attractive pro forma valuation of ~9.5x 2026E EV/EBITDA (vs. peer average ~11x),” Pham said. “KEY is not as defensive as peers with a higher degree of non-fee based assets, but it owns some attractive strategic infrastructure, its anticipated growth is significantly higher (10%+), and leverage is lower.”
The Plains acquisition is expected to increase Keyera’s fee-based EBITDA by ~50%, expand its NGL infrastructure in Western Canada and extend its reach into Eastern North America. The transaction also bolsters the company’s capacity in pipeline, fractionation, rail, and terminal assets, setting a platform for stronger integration and growth.
Accretion from the transaction is anticipated to be “to the tune of mid-teens in the first full year,” according to Pham. BMO estimates the guidance to be conservative and sees potential for a higher accretion impact, exceeding 20% once near-term run-rate synergies of C$100 million are realized.
Keyera intends to finance the acquisition with a C$1.8 billion equity issuance at C$39.15 per share, representing a 20% dilution, or 23% including the overallotment. The remaining funding will be met through new debt issuance and existing bank lines, pushing its debt-to-EBITDA ratio to 2.9x, still within its target range of 2.5x–3.0x and maintaining investment-grade ratings.
With the acquisition, Keyera’s business mix shifts toward a greater focus on liquids infrastructure, reducing exposure to gas processing and adding marketing scale. “On business mix, gas processing declines to 21% from 29%, liquids infrastructure increases to 49% vs. 38%, and marketing to 30% from 33%,” BMO noted in its analysis.
The deal is expected to close in the first quarter of 2026, subject to regulatory clearance under Canada’s Competition Act and other customary approvals. BMO has adjusted its forecast accordingly, leaving its 2025 EBITDA estimate unchanged but raising 2026 and 2027 projections to C$1.98 billion and C$2.08 billion, respectively.
“With an attractive 30%+ potential total return to our new target price of $54, positive strategic and financial benefits of the Plains NGL deal, and attractive relative valuation, we believe the risk/reward is more tilted to the positive,” concluded Pham.