Canada's Enbridge to Buy Spectra Energy in $28 bln Deal

 

Enbridge's biggest-ever deal comes as the company has been steadily expanding its North American pipeline network, which carries the bulk of Canadian crude oil to the United States.

 

Spectra shareholders will get 0.984 shares of the combined company for each share held. This is equivalent to $40.33 per share, representing a premium of about 11.5 percent to Spectra's closing price on Friday.

 

The deal has a pro-forma enterprise value of C$165 billion, the companies said. Spectra's total long-term debt stood at $13.58 billion as of June 30.

 

Spectra shares were up 5.8 percent at $38.25 in light premarket trading. Enbridge (ENB)'s U.S.-listed shares were down 1.8 percent at $40.25.

 

Enbridge Chief Executive Al Monaco will lead the combined company, which will have its headquarters in Calgary. Greg Ebel, Spectra's CEO, will be non-executive chairman.

 

After the close of the deal, Enbridge shareholders will own about 57 percent of the combined company, which is expected to deliver annual run-rate synergies of C$540 million, most of which is expected to be achieved in late 2018.

 

Enbridge said it planned to divest about $2 billion of non-core assets over the next year to stay financially flexible.

 

The deal is the second big one by a Canadian company for a U.S. pipeline operator in recent months.

 

TransCanada Corp, Canada's second-largest pipeline company, completed its $10.2 billion takeover of Columbia Pipeline Group in July.

 

Houston-based Spectra, which operates in both Canada and 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.

 

Spectra's shares have jumped about 51 percent since the start of the year, handily outperforming its peers on the Dow Jones U.S. Pipelines index even as low crude prices continued to drag on the North American oil and gas industry.

 

Enbridge bought a minority stake in the Bakken Pipeline system through a joint venture last month. It also won an auction for a stake in EnBW's Hohe See, one of Europe's largest offshore wind power projects, according to a source familiar with the matter.

 

Credit Suisse Securities (Canada) and RBC Capital Markets were Enbridge's financial advisers, while Sullivan & Cromwell LLP and McCarthy Tétrault LLP were its legal advisers.

 

BMO Capital Markets and Citi were Spectra Energy's financial advisers and Wachtell, Lipton, Rosen & Katz and Goodmans LLP its legal advisers. Skadden, Arps, Slate, Meagher & Flom LLP advised Spectra on tax issues.

 

The deal is expected to close in the first quarter of 2017.