Enbridge and Spectra Energy this morning announced plans to merge in a stock-for-stock deal that values Spectra at $28 billion and will create the largest energy infrastructure company in North America, according to SNL.
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Mr. Monaco earlier this year, mentioned that his company was seeking to invest in natural-gas and renewable-energy projects to rebalance its profits away from oil over the long run and invest in openings derived from the global shift to a lower-carbon economy. “The transaction premium recognizes the strength of Spectra Energy’s world-class natural gas pipeline system and significant expansion program, while providing shareholders the opportunity to participate in the unparalleled value creation potential of the combined company”, Ebel said. In 2006, Charlotte, North Carolina-based Duke purchased Cincinnati-based Cinergy Corp. After the deal is completed, Enbridge shareholders are expected to have ownership of about 57% of the combined entity while the rest will be owned by Spectra Energy shareholders.
Enbridge’s US shares rose $1.71, or 4.2 percent, to $42.70 in morning trading Tuesday. Spectra rose 8.6 percent from its September 2 close to $39.26 at 8:34 a.m.in NY.
The combined company’s assets would be worth about C$165 billion, both firms said.
The agreement comes after a decline in oil and gas prices that pummeled the shares of pipeline operators.
The companies plan to maintain “strong investment grade” credit ratings as projects that are now under construction come into service, Monaco said on a conference call.
“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.
The all-stock deal will create a network of more than 86,000 kilometers (54,000 miles) of oil and gas pipelines serving most of Canada and the United States, with the exception of the US Southwest and California markets.
“This transaction is transformational for both companies and results in unmatched scale, diversity and financial flexibility with multiple platforms for organic growth”, Monaco said.
On the company’s financial health, Spectra Energy Partners LP reported $0.73 EPS for the quarter, missing the analyst consensus estimate by $ -0.08 based on the information available during the earnings call on Aug 3, 2016.
The combined company will be headquartered in Calgary, Alberta, and Houston will be the center of the combined company’s gas pipelines business. Then, the company expects an annual 10%-12% dividend growth through 2024.
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After the transaction closes, Monaco will continue in that role, while Gregory L. Ebel, Spectra’s president and chief executive, will serve as nonexecutive chairman.
