Canada’s Enbridge Inc. (ENB) announced on Tuesday that it has agreed to acquire the Houston-based natural gas transmission company Spectra Energy for $28bn in an all-stock deal.
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Enbridge is making a big bet on natural gas with the C$37-billion friendly takeover of Spectra Energy Corp., as it looks to grow while facing severe pushback on infrastructure projects.
Spectra Energy CEO Greg Ebel will become chairman of the combined company, which will operate under the Enbridge banner.
“We are accomplishing that goal by combining with the premier natural gas infrastructure company to create a true North American and global energy infrastructure leader”.
The deal follows crosstown rival TransCanada Corp.’s purchase of Columbia Pipeline in July after it failed to win approval previous year for the proposed Keystone XL pipeline to boost heavy oil shipments from Alberta to Gulf Coast refineries. Several arrests were made last week at a site in North Dakota where Energy Transfer Partners is trying to build a line to IL.
Enbridge officials say their gas distribution will continue to be based in Ontario. In any event, some individual stocks posted much larger gains than the overall market, and Spectra Energy (NYSE:SE), Barnes & Noble (NYSE:BKS), and 3D Systems (NYSE:DDD) were among the best performers of the day. The rupture sent two large geysers skywards near the Clinton Presidential Center, and large chunks of concrete, possibly from the pipeline, were flung into the air and damaged a towboat moored nearby. Energy Transfer Equity LP terminated an agreement to buy Williams Cos. amid a stubborn two-year energy rout, while Kinder Morgan Inc. has moved to simplify its structure. “I think people will feel quite nervous about them”.
He said companies are also looking to merge for cost savings.
Enbridge’s US shares rose $1.71, or 4.2 percent, to $42.70 in morning trading Tuesday.
Monaco would continue to serve as president and CEO. Enbridge has expanded existing pipelines that carry oil across the border, helping Canada set new export records to the U.S. Their customer base is largely low risk, the companies said, with 93 percent of customers holding investment grade or equivalent ratings. “Now is the time to really be thinking about how to position for the future, when you are strong rather than in a position of weakness”, he said.
The consideration Spectra shareholders receive is valued at $40.33 per Spectra share, based on the closing price of Enbridge common on September 2, a roughly 11.5% premium to the closing price of Spectra common on September 2.
Enbridge would take on about $22 billion in Spectra debt, while Monaco said the company plans to sell about $2 billion of non-core assets over the next year. “This transaction is transformational for both companies and results in unmatched scale, diversity and financial flexibility with multiple platforms for organic growth”. In detail, shareholders of Spectra Energy will get 0.984 shares of the combined entity – in which Enbridge will have a 57% ownership and Spectra Energy will have the remaining 43% interest – for every common stock they hold.
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.
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Information for this article was contributed by Jessica Seaman of the Arkansas Democrat-Gazette.
