Spectra Energy Will Merge With Enbridge in $28 Billion Deal

Josh Kim
September 19, 2016

Under the terms of the deal, Spectra Energy shareholders will get 0.984 shares of the combined entity for every share they owned. The value for the deal is derived taking Enbridge's closing share price on September 2.

As a result of the merger, the Financial Times has reported: "Enbridge shareholders [would get] 57% and Spectra shareholders 43% of the merged group".

Al Monaco, president and chief executive officer of Enbridge, said, "With combined secured projects in execution of C$26 billion (US$20 billion) and another C$48 billion (US$37 billion) of projects under development, the Transaction allows us to extend our anticipated 10-12 percent annual dividend growth through 2024".

The companies say they expect to achieve operational savings worth about $540 million on an annualized basis, most of it achieved in the latter part of 2018.

If the deal closes as expected early next year, Spectra will add 140,800 kilometres of gas pipelines to bring Enbridge's total gas lines to 165,600 kilometres, while Spectra will add only 2,720 kilometres of liquids pipelines to Enbridge's existing 27,600 kilometres.

Houston, TX-based Spectra Energy through its subsidiaries and equity affiliates, engages in the ownership and operation of a portfolio of complementary natural gas-related energy assets.

Enbridge and Spectra Energy this morning announced plans to merge in a stock-for-stock deal that values Spectra at $28 billion and will create the largest energy infrastructure company in North America, according to SNL. That was not what torpedoed the much ballyhooed - and ultimately failed - merger of Williams Companies Inc.

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"In a release, Enbridge said it will use each company's complementary and diversified asset base to increase customer service offerings".

The boards of both companies have approved the deal, which is expected to close during the first quarter of 2017, subject to shareholder approval and antitrust clearance.

Enbridge (TSE:ENB) traded up 1.81% during trading on Wednesday, reaching $56.30.

Currently, Spectra Energy carries a Zacks Rank #3 (Hold) while Enbridge holds a Zacks Rank #2 (Buy).

Spectra Energy shareholders will get 0.984 shares of the merged company for each Spectra share, which are valued at $40.33, a premium of about 11.5% over Spectra's closing price on September 2.

Houston-based Spectra is in a joint-venture project with Detroit-based DTE Energy Co. to create the Nexus pipeline, a $2 billion project that will pipe natural gas sourced from Appalachian fracking fields in OH and Pennsylvania and will include 55 miles in Monroe, Washtenaw and Lenawee counties.

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