Canada’s Enbridge (TSE:ENB) and USA natural gas-focused peer Spectra Energy (NYSE:SE) have agreed to merge and form North America’s largest energy infrastructure company, with a renewables and alternative energy portfolio of almost 2 GW.
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The deal was announced in a Tuesday morning conference call to Spectra shareholders.
The combined company’s asset base will include oil and gas pipelines, a regulated utility portfolio and renewable power generation. Enbridge, whose USA -listed shares were untraded, closed at $40.99 on Friday.
The Enbridge-Spectra deal comes at a time when Enbridge’s planned oil-carrying Northern Gateway pipeline from Alberta to a marine export terminal at Kitimat faces an uncertain future because of court rulings and a proposed federal ban on oil tanker traffic on B.C.’s north coast. Bayer raised its offer for seed company Monsanto to $55.8 billion, while Canada’s Enbridge agreed to buy Spectra Energy for $28 billion. This represents a premium of around 11.5% to Spectra’s closing price on 2 September.
General Electric slipped 0.2 per cent after announcing US$1.4 billion in 3D printing acquisitions, while Monsanto climbed 0.6 per cent on news Germany’s Bayer raised its bid for the United States company.
Spectra shares were up 5.8 percent at $38.25 in light premarket trading. Spectra’s head Greg Ebel will become non-executive chairman of Enbridge’s board of directors.
The natural gas infrastructure business would be based in Houston and the liquids business would be based in Edmonton, both companies said.
Enbridge shareholders will own roughly 57% of the combined company and Spectra shareholders will own approximately 43%.
Tumbling oil prices have forced companies including pipeline operators to consider mergers to cut costs.
ENERGY: Benchmark U.S. crude oil fell 30 cents to $44.14 a barrel in NY.
Enbridgebought Aminority stake in the Bakken Pipeline system through Ajoint venture last month.
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BMO Capital Markets and Citi were SpectraEnergy’s financial advisers and Wachtell, Lipton, Rosen & Katz and Goodmans LLP its legal advisers. It also expects the deal will lead to a 15% annualized dividend increase next year and annual 10% to 12% percent dividend growth after that through 2024.
