Canada’s Enbridge is buying Houston-based Spectra Energy for about $28 billion, creating North America’s largest energy infrastructure company.
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The company’s operations in the USA and Canada include approximately 21,000 miles of natural gas and crude oil pipelines; approximately 300 billion cubic feet of natural gas storage; 4.8 million barrels of crude oil storage; as well as natural gas gathering, processing, and local distribution operations.
Spectra’s main focus is on natural gas, while oil makes up 80 percent of Enbridge’s pipelines.
TransCanada Corp. of Calgary announces it’s buying Houston-based Columbia Pipeline Group in a US$13 billion deal, including US$2.8 billion in liabilities.
“This transaction is transformational for both companies, and results in unmatched scale, diversity and financial flexibility with multiple platforms for organic growth”, said Monaco, who will stay on as president and CEO of the larger company.
With combined secured projects in execution of C$26 billion (US$20 billion) and another C$48 billion (US$37 billion) of projects under development, the transaction allows Enbridge to extend its anticipated 10-12 percent annual dividend growth through 2024, said Monaco.
The U.S. Federal Energy Regulatory Commission did not comment.
“The combination of Enbridge and Spectra Energy creates what we believe will be the best, most diversified energy infrastructure company in North America, if not the world”.
Enbridge’s US -listed shares rose 4.3 percent to $42.77 and its Toronto-listed shares bounced.
Under the terms of the deal, Spectra shareholders will get 98.4 shares of Enbridge for every 100 shares of Spectra they own. Based on the closing price of Enbridge common shares on Friday, that translates to US$40.33 per Spectra Energy share, representing about a 11.5-per-cent premium to Spectra Energy’s closing stock price Friday.
Lever said the resistance companies across Canada and the USA have faced in building new resource projects like pipelines has forced companies to look to mergers and acquisitions for growth.
Enbridge would take on about $22 billion in Spectra debt, while Monaco said the company plans to sell about $2 billion of non-core assets over the next year. Enbridge said it would divest $2 billion of noncore assets over the next 12 months to improve its balance sheet.
Michal Moore, economics professor at the University of Calgary agreed that it was a smart strategic move on Enbridge’s part, given the current political climate in Canada.
“As Mexican utilities start to use more and more gas they’re going to reach further and further into the market, including up to the Utica and Marcellus”, Spectra CEO Gregory Ebel said on a conference call with analysts.
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When the deal closes, which is expected to happen in the in the first quarter of 2017, Enbridge shareholders will own about 57 percent of the combined company and Spectra Energy shareholders will own about 43 percent.
