Enbridge Inc.is pushing deeper into natural gas shipping and distribution with its $37-billion acquisition of Spectra Energy Corp.
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The all-stock deal will create a network of more than 86,000 kilometers (54,000 miles) of oil and gas pipelines serving most of Canada and the United States, with the exception of the US Southwest and California markets. (WMB) amid a stubborn two-year energy rout, while Kinder Morgan (KMI) has moved to simplify its structure.
The deal is expected to close in the first quarter of 2017, pending shareholder and regulatory approvals.
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.
According to Zacks Investment Research, “Enbridge Inc., a Canadian company, is a leader in energy transportation and distribution in North America and internationally”. Upon completion of the deal, Enbridge shareholders are expected to own approximately 57% of the combined entity, and it will continue to operate under the Enbridge name.
On Tuesday, Canadian pipeline company Enbridge agreed to the purchase of Spectra Energy Corporation out of Houston. He will work closely with Paine & Partners to identify new investment opportunities in the sector and serve in a leadership role at attained companies.
The combination will also form one of the largest global energy infrastructure firms with the merger of the two companies’ highly complementary platforms.
Greg Ebel, President and Chief Executive Officer of Spectra Energy, who will become Chairman of Enbridge following the closing of the transaction.
The Enbridge-Spectra deal comes at a time when Enbridge’s planned oil-carrying Northern Gateway pipeline from Alberta to a marine export terminal at Kitimat faces an uncertain future because of court rulings and a proposed federal ban on oil tanker traffic on B.C.’s north coast. Enbridge Inc (TSE:ENB) has risen 17.73% since February 1, 2016 and is uptrending.
Spectra’s main focus is on natural gas, while oil makes up 80 percent of Enbridge’s pipelines.
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.
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Credit Suisse Securities and RBC Capital Markets acted as financial advisers to Enbridge while Sullivan & Cromwell LLP and McCarthy Tetrault LP provided legal advice. Goodmans LLP and Wachtell, Lipton, Rosen & Katz were legal advisors while Skadden, Arps, Slate, Meagher & Flom LLP were part of the tax counsel.
