Enbridge to become North America’s biggest energy infrastructure company
Enbridge to buy Spectra Energy in $37-billion deal
The Globe and Mail
Published Tuesday, Sep. 06, 2016 6:44AM EDT
Last updated Tuesday, Sep. 06, 2016 11:29AM EDT
Canada’s biggest pipeline company, Enbridge Inc., has struck an agreement to acquire Houston-based Spectra Energy Corp. in a $37-billion deal that will create North America’s biggest energy infrastructure company.
The combined entity would have a pro-forma enterprise value of about $165-billion and a diversified asset base including crude oil, liquids and natural gas pipelines, terminal and midstream operations, regulated utilities and renewable energy.
Enbridge buying Spectra Energy in $37-billion all-stock deal (BNN Video)
The all-stock transaction values Spectra at about $37-billion, based on the closing price of Calgary-based Enbridge’s common shares on Friday.
Head office will be located in Calgary and current Enbridge president and chief executive officer Al Monaco will become the president and CEO of the new company.
Spectra president and CEO Greg Ebel will become non-executive chairman of Enbridge.
Among the tie-up’s benefits to shareholders is an anticipated 15-per-cent annualized dividend increase in 2017, up from Enbridge’s previous target of 10-to-12 per cent. Annual dividend growth of 10-to-12 per cent is expected thereafter through 2024, the companies said.
Mr. Monaco said on a conference call Tuesday the deal will help diversify Enbridge with a balance between natural gas and crude.
Earlier this year, Mr. Monaco said his company was looking to invest in natural-gas and renewable-energy projects to rebalance its earnings away from oil over the long term and invest in opportunities arising from the global shift to a lower-carbon economy.
Enbridge and other companies with oil-sands-related projects have experienced a strong public and political backlash, as well as more stringent regulatory constraints, resulting in delays and uncertainty over some major pipeline projects.
Terms of the agreement announced Tuesday call for Spectra shareholders to receive 0.984 shares of the combined company for each Spectra share. That values the deal at $40.33 (U.S.) per Spectra share, an 11.5 per cent premium to Spectra’s closing price on Friday.
Enbridge shareholders will own about 57 per cent of the new company while Spectra investors will own about 43 per cent.
Revenue on a combined basis would be about $40-billion (Canadian), with earnings before interest and taxes (EBIT) of $5.8-billion.
“Over the last two years, we’ve been focused on identifying opportunities that would extend and diversify our asset based and sources of growth beyond 2019,” Mr. Monaco said.
“We are accomplishing that goal by combining with the premier natural gas infrastructure company to create a true North American and global energy infrastructure leader.”