Canada’s Enbridge Inc said on Tuesday it would buy Spectra Energy Corp of Houston in an all-stock deal valued at about $28 billion (C$37 billion) to create the largest North American energy infrastructure company.
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Enbridge Energy Partners, LP (NYSE:EEP) in a press release today announced that it would acquire the Houston-based natural gas infrastructure company, Spectra Energy Corp.
The deal values Spectra Energy common stock at about $28 billion, based on the closing price of Enbridge’s common shares on September 2.
Each shareholder will get 0.984 shares of the combined company’s stock for each SE share they own.
Spectra Energy shares closed Friday at US$36.15 on the New York Stock Exchange before the Labour Day holiday weekend.
Shares of Enbridge (TSE:ENB) traded up 1.81% on Wednesday, hitting $56.30.
Monaco will serve as the combined company’s CEO and president, while Spectra CEO and President Greg Ebel will serve as non-executive chairman of Enbridge’s Board of Directors.
Monaco will serve as the president and chief executive officer of the new company.
The new Enbridge will be the 4th largest company listed on the TSX, trailing only Royal Bank, TD Bank, and Bank of Nova Scotia once the transaction closes, which is expected to be in the first quarter of 2017.
That price represents an 11.5 percent premium to the closing price of Spectra Energy common stock on September 2.
The deal is “fabulous” for both companies, TheStreet’s Jim Cramer said on CNBC’s “Squawk on the Street” this morning.
“With combined secured projects in execution of C$26bn ($20bn) and another C$48bn ($37bn) of projects under development, the transaction allows us to extend our anticipated 10% to 12% annual dividend growth through to 2024”. It owns and operates Canada’s largest natural gas distribution company in Ontario, Quebec, New Brunswick and New York State, and owns almost 2,000 megawatts of renewable power generating capacity. Canadian firm Enbridge is the operator of the longest oil and liquids transportation system of the world.
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.
Enbridge operates about 33,000 miles of pipe, specializing in bringing oil sands from Canada to refiners on the United States’s Gulf Coast. Enbridge said it would divest $2 billion of noncore assets over the next 12 months to improve its balance sheet.
The combined company would operate under the Enbridge name.
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Spectra, a Fortune 500 company, is one of North America’s leading pipeline and midstream companies.
