Enbridge Energy Partners, LP (NYSE:EEP) in a press release today announced that it would acquire the Houston-based natural gas infrastructure company, Spectra Energy Corp. The transaction values Spectra Energy approximately $28 billion based on Enbridge’s shares closing price on September 2.
Advertisement
The energy space has been decimated by persistently low oil and natural gas prices over the past few years. In comparison, Energy Transfer Equity (ETE), Kinder Morgan (KMI), Williams Companies (WMB), and Enterprise Products Partners (EPD) are trading at forward multiples of 21.1x, 12.7x, 13.1x, and 14.4x, respectively.
If successful, the merging of Spectra Energy and Enbridge will result in the creation of the largest energy infrastructure company in North America.
Post closing, Enbridge shareholders will own about 57 per cent of the combined company and Spectra’s will own 43 per cent.
Enbridge Inc (Enbridge) is an energy transportation and distribution company. That diversifies Enbridge, which also like TransCanada, is getting some pushback on an oil pipeline from the oil sands in Alberta to Canada’s east coast.
The deal was unanimously approved by the boards of directors of both companies.
Founded: Spectra was formed in 2007 as a spin-off from Duke Energy, but traces its roots to 1911 and the Niagara Falls, Ont. -based Union Gas Company of Canada.
The acquisition would extend the Calgary-based firm’s already growing reach throughout the continent, Enbridge CEO Al Monaco said Tuesday. 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 companies’ pipeline assets “are irreplaceable; you could not build those assets today”, Spectra Chief Executive Greg Ebel said on an analyst conference call held to discuss the deal.
They expect the combined company will pay higher dividends, including a 15 per cent increase on current levels in 2017 after the deal closes.
But now more deals are starting to get done.
Enbridge had been working with refiner Marathon Petroleum Corp.to build Sandpiper – a major pipeline out of the Bakken Shale formation.
Advertisement
Once the merger of Spectra Energy and Enbridge is complete, there will be changes in leadership. BMO Capital Markets and Citi acted as financial advisers for Spectra while Wachtell, Lipton Rosen & Katz and Goodmans LLP 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.
