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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Yedlin, a business columnist with the Calgary Herald, said the merger makes Enbridge the largest energy infrastructure company in North America. 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.
Upon completion of the deal, about 57% of the combined company will be owned by Enbridge shareholders, while the remaining 43% will be owned by Spectra Energy shareholders.
Spectra Energy Partners LP closed down -0.21 points or -0.46% at $45.42 with 3,85,943 shares getting traded on Thursday.
Enbridge’s US -listed shares (ENB.N) rose 1.8 percent to $41.77, while its Toronto-listed shares rose about 2 percent to C$54.32.
The combined company brings together numerous highest quality energy infrastructure assets in North America: liquids and gas pipelines; USA and Canadian midstream businesses; a regulated utility portfolio; and a growing renewable power generation business.
The CEO and president of Spectra Energy, Greg Ebel, will become chairman of Enbridge once the merger is completed. As a transporter of energy, Enbridge operates, in Canada and the United States, the world’s longest crude oil and liquids pipeline system. A map of the combined companies’ infrastructure shows the deal would expand Enbridge’s reach in the Western Plains, Rocky Mountains, Appalachia, and the Northeast.
Spectra Energy is a major natural gas transporter in B.C. thanks to a 1,751 mile pipeline which begins in Fort Nelson in northeastern B.C. and at a location on the B.C./Alberta border which then runs south to the Canadian/U.S. border in the Fraser Valley.
The combined company’s “organic growth platform is expected to support a highly visible dividend growth rate of 10-12% through 2024, including an anticipated aggregate increase of 15% in 2017 post closing”, the companies said in the statement, adding that the merged entity will maintain a conservative payout of 50%-60%of available cash flow from operations (ACFFO). It has been hailed the “most significant” energy deal since oil prices crashed in 2014. This is equal to receiving United States dollars 40.33 per Spectra Energy share, according to the press statement. It also won an auction for a stake in EnBW’s Hohe See, one of Europe’s largest offshore wind power projects, according to a source familiar with the matter.
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Spectra Energy Corp. has 701,100,000 shares which are now outstanding with a price of 41.92 calculating Spectra Energy Corp.’s market capitalisation to 29.39B Dollars. BMO Capital Markets and Citi acted as financial advisers for Spectra while Wachtell, Lipton Rosen & Katz and Goodmans LLP provided legal advice.
