Canadian pipeline company Enbridge Inc., said Monday it would acquire Houston-based Spectra Energy in a $28 billion all-stock deal.
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Spectra shareholders will get $40.33 per share in the all-stock agreement, representing a premium of 12 percent to the September 2 closing price, according to a company statement Tuesday.
Per the transaction, Spectra Energy will be acquired by Enbridge in all stock deal valued as high as $28 billion. Once the deal is successfully closed, Enbridge will list its shares on the New York Stock Exchange (NYSE) and Toronto Stock Exchange, while Spectra Energy will be delisted from the NYSE.
The deal would give Calgary-based Enbridge (TSX:ENB) far more exposure to the natural gas side of the business and extend the company’s reach throughout the continent, Enbridge CEO Al Monaco said Tuesday on a conference call with analysts. 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. Under this type of agreement, a company must take an agreed product from a supplier or be forced to pay a penalty, thereby guaranteeing funds to the pipeline operator if oil prices continue to fall.
The transaction is subject to shareholder and certain regulatory approvals, as well as other customary conditions and is expected to close in the first quarter of next year.
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. The merger of these two companies will create North America’s largest energy infrastructure company with pro-forma enterprise value of about $127 billion (C$165 billion).
Enbridge said the combined company’s $57 billion organic growth platform is expected to support a “highly visible” dividend growth rate of 10 to 12 percent through 2024. The acquisition will create a major North American energy-infrastructure company in a notable climate: the energy industry is dealing with the fallout from low oil prices. This is an incredible opportunity for both companies and we at Spectra Energy could not be more excited about what it means going forward.
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Enbridge said in its statement that it expects to divest about $2 billion of noncore assets over the next 12 months. From a business point of view, its track record of winning pipeline building orders has pushed it ahead, making it one of North America’s leading pipeline and midstream companies. Mr. Monaco will be the president and CEO of the new company.
