Enbridge Inc. (TSX, NYSE: ENB) and Spectra Energy Corp. (NYSE: SE) on Sept. 6 announced that they have entered into a definitive merger agreement under which Enbridge and Spectra Energy will combine in a stock-for-stock merger transaction which values Spectra Energy common stock at approximately C$37 billion (US$28 billion).
The combination will create the largest energy infrastructure company in North America and one of the largest globally based on a pro-forma enterprise value of approximately C$165 billion (US$127 billion). The transaction was unanimously approved by the Boards of Directors of both companies and is expected to close in the first quarter of 2017, subject to shareholder and certain regulatory approvals, and other customary conditions.
Upon completion of the transaction, Enbridge shareholders are expected to own approximately 57% of the combined company and Spectra Energy shareholders are expected to own about 43%. The combined company will be called Enbridge Inc.
This combination brings together two highly complementary platforms to create North America’s largest energy infrastructure company. It will have an asset base that includes a diverse set of assets comprised of crude oil, liquids and natural gas pipelines, terminal and midstream operations, a regulated utility portfolio and renewable power generation. On a combined basis for the 12 months ended June 30, 2016, the company would have generated combined revenues in excess of C$40 billion (US$31 billion).
“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,” said Al Monaco, President and Chief Executive Officer of Enbridge. “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. This Transaction is transformational for both companies and results in unmatched scale, diversity and financial flexibility with multiple platforms for organic growth.”
Greg Ebel, President and Chief Executive Officer of Spectra Energy, who will become chairman of Enbridge, said: “The combination of Enbridge and Spectra Energy creates what we believe will be the best, most diversified energy infrastructure company in North America, if not the world. This is an incredible opportunity for both companies and we at Spectra Energy could not be more excited about what it means going forward.”
Ebel added: “The strength of the combined company will support a large capital program to fund the continued development of Spectra Energy’s existing, preeminent project inventory in addition to allowing the combined company to compete for and win the most attractive new growth projects – all while maintaining expected strong dividend growth with exceptional coverage. The transaction premium recognizes the strength of Spectra Energy’s world-class natural gas pipeline system and significant expansion program, while providing shareholders the opportunity to participate in the unparalleled value creation potential of the combined company.
Upon closing of the transaction, Al Monaco will continue to serve as President and Chief Executive Officer of the combined company. Greg Ebel will serve as non-executive Chairman of Enbridge’s Board of Directors. Enbridge’s Board of Directors is expected to have a total of 13 directors consisting of eight members designated by Enbridge, including Monaco, and five members designated by Spectra Energy, including Ebel.
The headquarters of the combined company will be in Calgary, Alberta. Houston, Texas will be the combined company’s gas pipelines business unit center; Edmonton, Alberta will remain the business unit center for liquids pipelines, with gas distribution continuing to be based in Ontario.
At closing, Enbridge Energy Partners LP and Spectra Energy Partners LP are expected to continue to be publicly traded partnerships headquartered in Houston, Texas. Enbridge Income Fund Holdings will remain a publicly traded corporation headquartered in Calgary, Alberta.
Enbridge operates the world’s longest crude oil and liquids transportation system across Canada and the U.S., and has a significant and growing involvement in natural gas gathering, transmission and midstream business, as well as an increasing involvement in power transmission. Enbridge owns and operates Canada’s largest natural gas distribution company, serving residential, commercial, and industrial customers in Ontario, Quebec, New Brunswick and New York State. Enbridge has interests in nearly 2,000 MW of net renewable and alternative generating capacity, and continues to expand into wind, solar and geothermal power. Enbridge employs nearly 11,000 people, primarily in Canada and the U.S.
Spectra Energy is one of North America’s leading pipeline and midstream companies. Based in Houston, Texas, the company’s operations in the United States and Canada include approximately 21,000 miles of natural gas and crude oil pipelines; about 300 billion cubic feet of natural gas storage; 4.8 million barrels of crude oil storage; as well as natural gas gathering, processing, and local distribution operations. Spectra Energy is the general partner of Spectra Energy Partners (NYSE: SEP), one of the largest pipeline master limited partnerships in the United States and owner of the natural gas and crude oil assets in Spectra Energy’s U.S. portfolio. Spectra Energy also has a 50% ownership in DCP Midstream, the largest producer of natural gas liquids and the largest natural gas processor in the United States.