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UPDATE 4-Canada's Pembina to buy Inter Pipeline for $6.9 bln, trumping Brookfield hostile bid

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(Adds shareholder quotes, Pembina CEO)

By Arathy S Nair and Nia Williams

CALGARY, Alberta, June 1 (Reuters) - Canada's Pembina Pipeline Corp said on Tuesday it will buy rival Inter Pipeline Ltd in an all-stock C$8.3 billion ($6.9 billion) deal, adding to its extensive infrastructure assets and creating one of Canada's top oil and gas transportation companies.

The deal comes nearly four months after Inter launched a strategic review as it fended off a C$7.1 billion hostile takeover bid from investment firm Brookfield Infrastructure Partners.

The combined entity would own around 25,000 kilometers (15,534.3 miles) of oil and gas pipelines, mainly in western Canada, as well as storage facilities and processing plants. The deal would also help Pembina benefit from rebounding oil and gas demand as the economy recovers from the pandemic.

"I've been thinking about this for 10 years, this is my third try," Pembina chief executive Michael Dilger said on a conference call. "The timing is right. Scale matters, service matters, the synergies here are incredible."

Inter on Tuesday reiterated its recommendation, first made in March, that shareholders reject Brookfield's bid of C$16.50 per share, saying the offer significantly undervalued the company. Brookfield had previously said it could raise the offer to as much as C$18.25 per share.

Brookfield declined a Reuters request for comment.

Ryan Bushell, president of Newhaven Asset Management, which holds shares in all three companies, said he would be surprised if Brookfield came back with a higher offer.

"It's a good price for Pembina, it's not a good price for Inter," Bushell said. "I'm a bit happier with Pembina as the buyer than Brookfield because there are more synergies."

Inter shareholders will receive half a share of Pembina for each share they own, representing a deal value of C$19.45 per Inter share, a 10.8% premium as of the stock's Monday close. Inter shares were last up 8.7% at C$19.07, while Pembina shares dropped 2.7% to C$37.85.

Inter is building a C$4 billion petrochemical complex near Edmonton, Alberta, due to start operating early next year. That left the company vulnerable to Brookfield's hostile bid. Pembina scrapped plans for a similar petrochemical plant last December, citing uncertainty caused by the pandemic.

Pembina's deal values Inter at about C$15.2 billion, including debt, with its shareholders expected to own 72% of the combined company and Inter shareholders owning the rest.

($1 = 1.2030 Canadian dollars) (Reporting by Arathy S Nair in Bengaluru; additional reporting by Maiya Keidan; Editing by Vinay Dwivedi and David Gregorio)