The combined natural gas pipeline business will be operated out of Houston, while the liquids pipelines will be run out of Edmonton.
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In the face of increasing environmental backlash, legal disputes and sluggish oil production, the deal will provide a much-needed financial boost to the two companies, providing anticipated savings of $415m a year from cost cuts, and a further $200m a year in tax benefits.
Enbridge’s president and CEO Al Monaco said: “Over the last two years, we’ve been focused on identifying opportunities that would extend and diversify our asset base and sources of growth beyond 2019”. The merger will produce one of the largest energy infrastructure companies in North America, based on a pro-forma enterprise value of around $127bn. “They still have the same kind of political environment and the same kind of regulatory hurdles”, said Gaetan Caron, former chair of the National Energy Board.
Spectra Energy shares were also up another 2% at $41.94 on Wednesday, after rising from $36.15 to $41.00 after the deal was announced. Post opening the session at $45.54, the shares hit an intraday low of $44.944 and an intraday high of $45.67 and the price fluctuated in this range throughout the day.Shares ended Thursday session in Red.
This is equal to US$40.33 per share, representing a premium of about 11.5 percent to Spectra’s closing price on Friday, Reuters reports. Energy Transfer’s Kelcy Warren said in an August 12 interview that his company is “gearing back up” with an acquisition strategy and that the “doors are open” for possible deals. A CAN$37 billion deal will create a new integrated pipeline giant, with a combined value of US$127 billion. Enbridge also said it planned to divest about $2 billion of non-core assets over the next year.
Enbridge’s deal would vault the Calgary-based company into North America’s largest energy pipeline and storage player. Greg Ebel, Spectra’s CEO, will be non-executive chairman. Upon completion of the Transaction, Enbridge shareholders are expected to own about 57 percent of the combined company and Spectra Energy shareholders are expected to own about 43 percent.
Despite lots of talk about an M&A wave, only a handful of energy acquisitions have happened since oil and gas prices entered their worst slump in a generation as buyers and sellers have been unable to agree on prices.
24/7 Wall St. has already covered who gets what here, for how much, and what some of the benefits were shown to be. (TSE:ENB), 8 rate it a “Buy”, 0 “Sell”, while 2 “Hold”. This spring, it bought Columbia Pipeline Group to create a network spanning from Canada to Mexico.
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Enbridge bought a minority stake in the Bakken Pipeline last month. RBC Capital Markets maintained the stock on September 2 with “Outperform” rating. Company shares were Reiterated by Stifel on Aug 4, 2016 to “Buy”, Firm has raised the Price Target to $ 55 from a previous price target of $50.Simmons Initiated Spectra Energy Partners LP on Aug 1, 2016 to “Overweight”, Price Target of the shares are set at $60.Stifel Initiated Spectra Energy Partners LP on May 31, 2016 to “Buy”, Price Target of the shares are set at $50.
