Under the terms of the transaction, Spectra shareholders will receive shares of Enbridge valued at around $40.33 each, or a premium of about 11.5% to the closing price on Friday.
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Spectra shareholders will own about 43 percent of the new company while Enbridge shareholders will own about 57 percent.
Shares of Spectra Energy (SE) were up more than 14% in midday trading Monday to $41.34.
Enbridge plans to sell off at least $2 billion in non-core operations – with a potential of $5 billion to $6 billion in additional monetization – and find $540 million in synergies by 2018.
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.
The combined company’s natural gas pipelines business would be based in Houston and its liquids pipelines business would be based in Edmonton.
It will have a diverse set of assets including crude oil, liquids, and natural gas pipelines, terminal and midstream operations, a regulated utility portfolio, and renewable power generation.
The U.S. Federal Energy Regulatory Commission did not comment. Sponsored Investments includes the Company’s 33.7% economic interest in Enbridge Energy Partners L.P. (EEP) and Enbridge’s interests in both the Eastern Access and Lakehead System Mainline expansion projects held through Enbridge Energy Limited Partnership (EELP).
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.
With the merger, Enbridge will become the fourth-largest company in Canada, with assets extending from Zama City in northern Alberta to the U.S. Gulf Coast.
Both companies operate pipelines that deliver oil and natural gas.
“We’ll be the FedEx” of the pipeline business, Greg Ebel, Houston-based Spectra’s chief executive officer, said in an interview.
ENB CEO Al Monaco will continue to lead the company. Over the next 12 months, Enbridge said it expects to divest about $2 billion of noncore assets. It has been hailed the “most significant” energy deal since oil prices crashed in 2014. The deal, which the companies say is expected to close in the first quarter of 2017, was approved unanimously by both companies’ boards of directors.
Credit Suisse Securities and RBC Capital Markets acted as financial advisers to Enbridge while Sullivan & Cromwell LLP and McCarthy Tetrault LP provided legal advice.
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BMO Capital Markets and Citi were Spectra Energy’s financial advisers and Wachtell, Lipton, Rosen & Katz and Goodmans LLP its legal advisers.
