The all-stock deal with Houston-based Spectra – the largest-ever foreign acquisition by a Canadian company – will create the biggest energy infrastructure company in North America, with a combined value of about $165 billion. The consideration to be received by Spectra Energy shareholders is valued at US$40.33 per Spectra Energy share, based on the closing price of Enbridge common shares on September 2, 2016, representing an approximate 11.5% premium to the closing price of Spectra Energy common stock on September 2, 2016.
Advertisement
Spectra shareholders will own about 43 percent of the new company while Enbridge shareholders will own about 57 percent.
Over the last twelve months Spectra Energy Corp.’s share price has increased from 27.23 to 41.92, changing by 53.95%.
Enbridge’s USA shares rose $1.71, or 4.2 percent, to $42.70 in morning trading Tuesday.
In total, the company boasts 21,000 miles of natural-gas and crude oil pipelines, almost 300 billion billions of cubic feet of natural-gas storage and 4.8 million barrels of crude oil storage.
Enbridge, a solid dividend-paying stock with an approximate four percent yield, was looking for opportunities for the past two years that would extend and diversify its asset base and sources of growth beyond 2019, according to Al Monaco, president and chief executive officer of Enbridge.
Calgary-based Enbridge Inc. plans to acquire Houston-based Spectra Energy Corp.in an all-stock deal worth US$28 billion. “This unified company will be one of the most diversified in North America”.
The takeover comes amid a wave of consolidation in the pipeline industry, after lower oil and natural gas prices have diminished demand for shipments and as building new projects becomes increasingly hard because of local opposition.
The stock-for-stock deal values Spectra common at roughly $28 billion, based on the closing price of Enbridge’s common shares on September 2, Kallanish Energy calculates.
But after a plummet in energy prices past year, investors became skittish about pipelines as well because many of their customers were on the brink of bankruptcy.
The CEO and president of Spectra Energy, Greg Ebel, will become chairman of Enbridge once the merger is completed.
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.
Advertisement
Enbridge’s Board hired Credit Suisse Securities (Canada), Inc.as lead financial advisor along with RBC Capital Markets. BMO Capital Markets and Citi acted as financial advisers for Spectra while Wachtell, Lipton Rosen & Katz and Goodmans LLP provided legal advice.
