Spectra Energy Will Merge With Enbridge in $28 Billion Deal

Pipeline operator Spectra Energy Corp. (NYSE:SE) said today that it would merge with Canada’s Enbridge Inc. to create a combined $28 billion pipeline and storage giant.

Once the transaction closes in the first quarter of 2017, The newly-joined company would be the largest pipeline and storage company North America.

From the press release:

Under the terms of the Transaction, Spectra Energy shareholders will receive 0.984 shares of the combined company for each share of Spectra Energy common stock they own. The consideration to be received by Spectra Energy shareholders is valued at US$40.33 per Spectra Energy share, based on the closing price of Enbridge common shares on September 2, 2016, representing an approximate 11.5 percent premium to the closing price of Spectra Energy common stock on September 2, 2016. Upon completion of the Transaction, Enbridge shareholders are expected to own approximately 57 percent of the combined company and Spectra Energy shareholders are expected to own approximately 43 percent. The combined company will be called Enbridge Inc.

Both companies’ CEOs offered positive commentary on the merger:

“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, Enbridge Inc. “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 following the closing of the Transaction, 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. Together, the merged company will have what we believe is the finest platform for serving customers in every region of North America and providing investors with the opportunity for superior shareholder returns.”

The energy space has been decimated by persistently low oil and natural gas prices over the past few years. Still, many energy stocks have bounced significantly off multi-year lows, despite only a slight uptick in oil prices off the bottom.

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Spectra Energy shares rose $2.10 (+5.81%) to $38.25 in premarket trading this morning. Prior to the merger news, SE had already gained about 51% year-to-date.

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