Canadian pipeline operator Enbridge Inc. on Tuesday agreed to buy Houston’sSpectra Energy Corp.in an all-stock deal valued at about $28 billion, creating a North American energy-infrastructure giant at a time when growth is challenged by lower commodity prices and higher regulatory hurdles. Spectra Energy shareholders will also receive 0.984 shares of the combined company for each common stock share of Spectra they now own.
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Spectra shareholders will get $40.33 per share in the all-stock agreement, representing a premium of 12 per cent to the September 2 closing price, according to a company statement Tuesday.
Instead of issuing new equity, the companies said they would seek to fund a streamlined growth portfolio through free cash flow and asset sales of up to 8 billion Canadian dollars (US$6.2 billion).
But organic growth remains challenging, which has made existing infrastructure more valuable, said Spectra CEO Greg Ebel, who will be chairman of the combined company.
Spectra shareholders will own about 43 percent of the new company while Enbridge shareholders will own about 57 percent.
Enbridge’s pipelines mainly send Canadian oil sands to refiners on the US Gulf Coast, while Spectra’s network ships natural gas to the US East Coast. The deal “adds diversity” to both companies and “extends the runway of double-digit dividend growth for ENB shareholders through 2024”, Thummel said.
The companies expect the deal to close in the first quarter of 2017, although it is subject to shareholder approvals from both companies as well as regulatory clearance.
Enbridge Inc.is an energy transportation and distribution company.
“Bringing Enbridge and Spectra Energy together makes strong strategic and financial sense, and the all-stock nature of the transaction provides shareholders of both companies with the opportunity to participate in the significant upside potential of the combined company, ” Mr. Monaco said. Enbridge employs almost 11,000 people, primarily in Canada and the United States. Canada’s BNN TV said key details in the deal include the promise of $500 million in cost savings while it also noted for Enbridge and Spectra it really doesn’t matter where the oil price is, so long as oil is being moved.
Spectra Energy Corporation is a spin off of Duke Energy. But last month the companies announced that they would buy a stake in a competing pipeline being built in the region, and Enbridge announced last week that its Sandpiper pipeline project is being deferred. Their assets will also include USA and Canadian midstream businesses, a regulated utility portfolio, and a growing renewable power generation business. Spectra owns 50 per cent of DCP Midstream, which owns or operates 61 plants, 12 fractionating facilities and 100,000 kilometres of natural gas pipeline in the United States.
The headquarters of the combined company would be in Calgary.
As part of the deal Enbridge will also gain 2.9 billion cubic feet per day of capacity in the Montney formation in northern Alberta and British Columbia, which has faced stiff competition from Marcellus gas in recent years.
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Enbridge Energy Partners LP and Spectra Energy Partners are expected to continue to be publicly traded partnerships headquartered in Houston.
