Calgary-based Enbridge Inc. (ENB.TO) said Monday it will buy Houston-based Spectra Energy Corp.in a $37-billion cross-border deal that will create the largest energy pipeline and storage company in North America. It is the general partner of Spectra Energy Partners LP, owner of the natural gas and crude oil assets in Spectra Energy’s USA portfolio.
Enbridge’s biggest-ever deal will consolidate its leading position next to USA transport giants Kinder Morgan Inc and Plains All American Pipeline LP, which have seen their stock prices sink over the last two years as oil and gas producers slash spending on new wells. Based on Friday’s closing price, each share is valued at $40.33.
Enbridge Chief Executive Al Monaco, who will be president and CEO of the combined company, called the deal for Spectra an “extension of the runway” for the two.
Canadian energy company Enbridge said it was combining with its counterpart Spectra Energy to create what it said was a North American infrastructure giant.
Enbridge shareholders will own roughly 57% of the combined company and Spectra shareholders will own approximately 43%.
On the company’s financial health, Spectra Energy Partners LP reported $0.73 EPS for the quarter, missing the analyst consensus estimate by $ -0.08 based on the information available during the earnings call on Aug 3, 2016. Ebel will serve as non-executive chairman of Enbridge’s board, which is expected to have 13 directors consisting of eight members designated by Enbridge, including Monaco, and five members designated by Spectra Energy, including Ebel.
The Enbridge-Spectra deal comes at a time when Enbridge’s planned oil-carrying Northern Gateway pipeline from Alberta to a marine export terminal at Kitimat faces an uncertain future because of court rulings and a proposed federal ban on oil tanker traffic on B.C.’s north coast. Mr. Monaco will be the president and CEO of the new company.
The combined company’s assets would be worth about C$165 billion, both firms said. “With combined secured projects in execution of U.S $20 billion and another USA $37 billion of projects under development, the transaction allows us to extend our anticipated 10-12 percent annual dividend growth through 2024”, Monaco continued. Last month, it announced that it and Marathon Petroleum were investing in Dakota Access, with the two companies acquiring 49% equity interest in the Bakken Pipeline System from Energy Transfer and Sunoco Logistics. This is equal to receiving United States dollars 40.33 per Spectra Energy share, according to the press statement.
The combined company would operate under the Enbridge name.
Houston-based Spectra, which operates in both Canadaand the United States, has 21,000 miles (33,800 km) of natural gas and oil pipelines and storage for about 300 billion cubic feet (8.5 billion cubic meters) of natural gas storage and 4.8 million barrels of crude oil. Goodmans LLP and Wachtell, Lipton, Rosen Katz were legal advisors while Skadden, Arps, Slate, Meagher Flom LLP were part of the tax counsel.