On Tuesday, as the Labour Day long weekend faded from the calendar, Enbridge Inc. became the latest pipeline firm to pull the trigger on a major acquisition, agreeing to a friendly -billion merger with Houston-based Spectra Energy Corp. Spectra Energy shareholders will also receive 0.984 shares of the combined company for each common stock share of Spectra they now own.
Advertisement
The consideration to be received by Spectra Energy shareholders is valued at $40.33 per Spectra Energy share, based on the closing price of Enbridge common shares on September 2.
“We’ll be the FedEx” of the pipeline business, Greg Ebel, Houston-based Spectra’s chief executive officer, said in an interview.
Enbridge and Spectra Energy are set to merge to combine to create a US$127 billion (£94.96 billion) energy infrastructure company.
If the deal goes through, it will create an energy infrastructure company with the largest pipeline network and storage facilities of natural gas within North America.
Master limited partnerships for the respective companies, Enbridge Energy Partners and Spectra Energy Partners will, however, continue as separate publicly traded firms.
This is the largest deal in Enbridge’s history and also the largest foreign purchase by a Canadian company to date.
On the company’s financial health, Enbridge Inc (USA) reported $0.50 EPS for the quarter, based on the information available during the earnings call on Jul 29, 2016.
Investors of both companies seemed to approve of the deal, with Enbridge shares increasing by 3.85% in Toronto trading and Spectra’s jumping 13.45% in NY.
The deal was unanimously approved by the boards of directors of both companies.
Barrick Gold Corp rose 2.8 percent to C$24.25, while spot gold gained 1 percent as the dollar weakened on expectations that the Federal Reserve will not raise USA interest rates at its September policy meeting. The Northeast G&P segment includes natural gas gathering and processing and NGL fractionation businesses. Similarly, Spectra suffered a severe setback in August, after the US Supreme Judicial Court intervened in a tax dispute between customers of a Spectra-owned pipeline system.
The takeover, the most significant energy deal since oil and natural gas prices crashed in mid-2014, highlights how pipeline companies are under pressure to merge as they grapple with overcapacity and sliding tariffs that have slowed dividend growth and unnerved investors.
Spectra Energy shareholders are expected to own about 43 percent of the combined company. TransCanada Corp. agreed in March to buy Columbia Pipeline Group Inc. for $10.2 billion.
Advertisement
Enbridge said expects it would divest about $2 billion of noncore assets to provide additional financial flexibility.
