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Pipeline operator Enbridge to buy Spectra Energy for $28B

11 September 2016

Greg Ebel, Spectra's president and CEO will become non-executive chairman of Enbridge.

Lever said the resistance companies across Canada and the US have faced in building new resource projects like pipelines has forced companies to look to mergers and acquisitions for growth. Last week, local people in Montreal disrupted hearings of TransCanada's new pipeline. Several arrests were made last week at a site in North Dakota where Energy Transfer Partners is trying to build a line to IL.

Barry Munro, head of oil and gas at EY, said energy companies are looking to merge to gain strength, and access cheaper capital, as the energy sector downturn drags on.

Houston-based Spectra's pipeline, storage and processing operations extend from gas fields in northern British Columbia through the U.S. Midwest and to the Gulf of Mexico. Spectra owns 50 per cent of the conduit. While around 70 percent of Enbridge's earnings now comes from crude oil transport and storage, this will be reduced to less than 50 percent, with the remainder coming from natural gas instead. The combined entity would also position Enbridge as the fourth largest company in Canada. (WMB) amid a stubborn two-year energy rout, while Kinder Morgan (KMI) has moved to simplify its structure. "I think people will feel quite nervous about them".

The stock-for-stock deal values Spectra common at roughly $28 billion, based on the closing price of Enbridge's common shares on September 2, Kallanish Energy calculates. Enbridge has a 12-month low of $40.03 and a 12-month high of $57.84. Once the deal is successfully closed, Enbridge will list its shares on the New York Stock Exchange (NYSE) and Toronto Stock Exchange, while Spectra Energy will be delisted from the NYSE.

"Now is the time to really be thinking of positioning for the future", Monaco said.

Enbridge is a North American leader in delivering energy operating the world's longest crude oil and liquids transportation system across Canada and the US. "For us, strategically it's a check for us to move forward with the gas business". The transaction values Spectra Energy approximately $28 billion based on Enbridge's shares closing price on September 2. The two company's are expecting the deal to close in the first quarter of 2017. The combination will create the leading energy infrastructure company in North America and one of the leading globally based on a pro-forma enterprise value of about C$165 billion (US$127 billion).

Spectra shareholders will receive 0.984 Enbridge shares for every Spectra share owned. Finally, TD Securities increased their price objective on shares of Enbridge from C$58.00 to C$59.00 and gave the company a "buy" rating in a research report on Tuesday, August 2nd.