Pipeline operator Enbridge to buy Spectra Energy for $28B

Canadian pipeline operator Enbridge (ENB) said Tuesday it agreed to buy Houston-based Spectra Energy (SE) for $28 billion in stock, creating the largest energy infrastructure provider in North America. Enbridge shareholders will own 57 per cent of the new company.

The head office will be in Calgary with the present Enbridge president and chief executive officer, Al Monaco, becoming the president and CEO of the new company.

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.

The deal was announced in a Tuesday morning conference call to Spectra shareholders.

The $40.33 value for SE shares represents an 11.6% premium over the stock’s closing price on September 2, 2016. The stock-for-stock merger will have SE shares valued at $40.33.

“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”.

“In a release, Enbridge said it will use each company’s complementary and diversified asset base to increase customer service offerings”. Greg Ebel, Spectra’s CEO, will be non-executive chairman.

“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”, he said.

But now more deals are starting to get done.

The deal follows crosstown rival TransCanada Corp.’s purchase of Columbia Pipeline in July after it failed to win approval past year for the proposed Keystone XL pipeline to boost heavy oil shipments from Alberta to Gulf Coast refineries.

Enbridge bought a minority stake in the Bakken Pipeline system through a joint venture last month.

Lever said the resistance companies across Canada and the US have faced in building new resource projects like pipelines has forced companies to look to mergers and acquisitions for growth. BMO Capital Markets and Citi acted as financial advisers for Spectra while Wachtell, Lipton Rosen & Katz and Goodmans LLP provided legal advice. Skadden, Arps, Slate, Meagher & Flom LLP advised Spectra on tax issues. The two company’s are expecting the deal to close in the first quarter of 2017.