The all-stock deal will create the largest pipeline and infrastructure company in North America, and the two companies said that they anticipated a 15% annualized dividend increase in 2017 following the merger.
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Spectra shareholders will get 0.984 shares of the combined company for each share they own, valued at about $40.33 a share, based on share prices on September 2. The consideration is valued at US$40.33/share, based on the closing price of Enbridge common shares on Friday, representing an approximate 11.5% premium to the closing price of Spectra Energy common stock on the same day. Enbridge will issue about 694 million new shares and take on about $22 billion of Spectra debt.
“From that standpoint, by combining the two companies, I think we’re going to be able to reach more customers and fuel the economy here in the USA”, said Michael Barnes, communications manager with Enbridge, which already has its USA headquarters in Houston. Greg Ebel, president and CEO of Spectra, will be chairman of the new Enbridge once the merger is complete, expectedly early next year.
After the close of the deal, Enbridge shareholders will own about 57 percent of the combined company, which is expected to deliver annual savings of C$540 million, most of which are expected to be achieved in late 2018.
TransCanada Corp. – which faced significant opposition to its Keystone XL pipeline project before the USA government rejected it, and continuing opposition to its Energy East pipeline – opted to make a US$13-billion acquisition of Columbia Pipeline Group earlier this year to expand its network.
“The proposed merger of Enbridge and Spectra Energy, two fossil fuel pipeline giants that already control much of the oil and gas flow throughout the country, would be bad news for energy consumers and awful news for the clean energy revolution on which the future of our planet depends”, she said. “.[T] he merged company will have what we believe is the finest platform for serving customers in every region of North America and providing investors with the opportunity for superior shareholder returns”.
“If you’re standing back as a board member and say, ‘I have to deploy capital to continue to grow, ‘ you’re going to look to where practically you’re going to be able to deploy that capital”, said Munro.
Bloomberg’s Liam Denning says combining the two companies “should entrench their advantage when it comes to raising money”.
The expansion is part of a broader attempt by Enbridge to diversify its asset base amid lower oil prices and mounting pressure against major pipeline proposals, which continue to be stymied by opposition groups.
Enbridge operates the world’s longest crude oil and liquids transportation system across Canada and the United States and has a growing involvement in natural gas gathering, transmission and midstream business, as well as an increasing involvement in power transmission.
For too long, the direction of acquisitions has flowed from the south, with Canadian companies bought up by US players.
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Enbridge’s share price closed up $2.05 or 3.9 per cent at $55.30 on the TSX, while Spectra’s share price closed up US$4.85 or 13.4 per cent to US$41 on the NYSE. Over the next 12 months, Enbridge said it expects to divest about $2 billion of noncore assets. The headquarters will be in Calgary, where Enbridge is based.
