Columbia operates a 24,000-kilometre pipeline network that stretches from NY to the Gulf of Mexico, tapping into prolific shale gas deposits in the northeastern United States. Columbia Pipeline operates 15,000 miles of pipelines, including assets in Ohio. Columbia’s footprint is concentrated in the Marcellus and Utica shale regions, which have produced much of the USA shale oil and gas boom fueled by advanced fracking techniques.
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The deal will combine TransCanada’s North American energy infrastructure network with Columbia Pipeline’s strategically located interstate pipeline, midstream and storage assets.
The deal, which is valued at US$13 billion including debt, comes months after U.S. President Barack Obama blocked the cross-border Keystone XL pipeline, handing a victory to environmentalists who had campaigned against the project for more than seven years.
TransCanada CEO Russ Girling said on a conference call that the deal would give the company a strong position in the two most lucrative gas regions on the continent: western Canada and the Utica and Marcellus.
It’s also aiming to sell U.S. Northeast merchant power assets and its minority interest in a Mexican natural gas pipeline business. The company after the upgrade has $25.00 target price per share on firm. Deals worth at least $2.3 billion in the sector have been announced in 2016. The firm has a market cap of $9.40 billion and a P/E ratio of 29.06. Columbia Pipeline Group Inc was the topic in 8 analyst reports since July 21, 2015 according to StockzIntelligence Inc.
TransCanada’s purchase of Columbia may ease investor concerns over TransCanada’s ability to grow over the long term, given that its large pipeline projects have been delayed or blocked.
TransCanada has made headlines in recent years with attempts to build new crude oil pipelines like Keystone XL and Energy East. Looking forward, TransCanada’s $13.5 billion portfolio of near-term investment opportunities together with Columbia’s $9.6 billion (US$7.3 billion) of commercially secured projects, and approximately US$250 million of targeted annual cost, revenue and financing benefits, are expected to deliver significant shareholder value over the coming years.
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Wells Fargo Securities LLC was TransCanada’s financial adviser and Mayer Brown LLP, Blake, Cassels & Graydon LLP and Osler, Hoskin & Harcourt LLP were its legal advisers. All comments are subject to editorial review.
