On September 6, Canadian pipeline operator Enbridge agreed to buy fellow line owner Spectra Energy Corp, in what will be the largest foreign purchase in Canada’s financial history.
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Under the terms, Spectra shareholders will receive 0.984 shares of the combined company for each share of Spectra common stock they own.
The takeover, the most significant energy deal since oil and natural gas prices crashed in mid-2014, highlights how pipeline companies are under pressure to merge as they grapple with overcapacity and sliding tariffs that have slowed dividend growth and unnerved investors. (WMB) amid a stubborn two-year energy rout, while Kinder Morgan (KMI) has moved to simplify its structure. The deal values Spectra Energy’s common stock at around CAD 37 billion, based on Enbridge’s closing on September 2, 2016.
If successful, the merging of Spectra Energy and Enbridge will result in the creation of the largest energy infrastructure company in North America. Upon completion of the Transaction, Enbridge shareholders are expected to own approximately 57 percent of the combined company and Spectra Energy shareholders are expected to own approximately 43 percent. According to Canada’s BNN TV, numerous questions put to Enbridge management on a conference call held around the Spectra deal news were around what Enbridge will do next.
Enbridge Inc.is set to begin a merger with Spectra Energy Corp. Greg Ebel, president and CEO of Spectra, will be chairman of the new Enbridge once the merger is complete, expectedly early next year.
The deal would allow both the companies to diversify their operations and mitigate risk in the process.
Spectra has several pipelines and properties in Northeast B.C., including the Pine River Gas plant, which has been closed since flooding struck the region in June.
The combined body would have a pro-forma enterprise worth $165-billion and a diversified asset base including crude oil, natural gas pipelines and liquids, terminal and midstream operations, regulated utilities and renewable energy.
Monaco would continue to serve as president and CEO.
Spectra shares rose $4.85, or 13 percent, to close Tuesday at $41. Enbridge Income Fund Holdings would remain a publicly traded corporation headquartered in Calgary. This is equal to receiving Dollars 40.33 per Spectra Energy share, according to the press statement. Enbridge said it would divest $2 billion of noncore assets over the next 12 months to improve its balance sheet.
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The deal, which is subject to regulatory approval, is the biggest energy merger since oil prices started to crash in the middle of 2014. BMO Capital Markets and Citi acted as financial advisers for Spectra while Wachtell, Lipton Rosen & Katz and Goodmans LLP provided legal advice.
