Enbridge Inc. has finalized an agreement to purchase Spectra Energy Corp in a $37-billion deal that will create North America’s biggest energy infrastructure company.
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Under the terms of the Transaction, Spectra Energy shareholders will receive 0.984 shares of the combined company for each share of Spectra Energy common stock they own.
The company’s operations in the U.S. and Canada include approximately 21,000 miles of natural gas and crude oil pipelines; approximately 300 billion cubic feet of natural gas storage; 4.8 million barrels of crude oil storage; as well as natural gas gathering, processing, and local distribution operations. (WMB) amid a stubborn two-year energy rout, while Kinder Morgan (KMI) has moved to simplify its structure. Spectra shareholders will get $40.33 per share, representing a premium of about 11.5 percent to the closing price on September 2.
Shares of Spectra Energy (SE) were spiking 14.58% to $41.42 in mid-afternoon trading on Tuesday after Canadian pipeline company Enbridge (ENB) said it would acquire the company in a $28 billion deal. Enbridge’s investors are expected to hold a combined stake of about 57% in the enlarged company upon completion, while those of Spectra Energy will own the rest of the shares.
The new company will be called Enbridge Inc.
The pipeline industry’s stock prices have been recovering, but the ability to combine gives these companies the chance to bulk up and diversify their offerings.
The deal was unanimously approved by the boards of directors of both companies.
Houston-based Spectra’s pipeline, storage and processing operations extend from gas fields in northern British Columbia through the U.S. Midwest and to the Gulf of Mexico.
“Greg Ebel, Chief executive officer at Spectra Energy, said, “[With the deal, ] we’ll be the FedEx [in the energy infrastructure sector]”.
After the transaction closes, Monaco will continue in that role, while Gregory L. Ebel, Spectra’s president and chief executive, will serve as nonexecutive chairman. Enbridge said it expects to divest about $2 billion in noncore assets over the next 12 months “to provide additional financial flexibility”.
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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. Goodmans LLP and Wachtell, Lipton, Rosen & Katz were legal advisors while Skadden, Arps, Slate, Meagher & Flom LLP were part of the tax counsel.
