On February 27, 2017, Enbridge (headquartered in Calgary, Alberta), acquired Houston-based Spectra Energy—creating the largest energy infrastructure company in North America. The stock-for-stock deal is worth US$28.7 billion. Enbridge’s major business segments are liquid pipelines, gas distribution, gas pipelines and processing, energy services, and renewable power and transmission. The acquisition adds Spectra Energy’s gas distribution, Western Canada transmission and processing, field services, and Spectra Energy Partners businesses. The combined entity has an enterprise value of US$127 billion.

Key Details

• Enbridge added 19,000 km of gas pipeline infrastructure to their already existing 24,800 km, thereby positioning themselves to provide terminal and midstream operations to the United States
• The merger brings an additional 1.4 million retail gas customers to Enbridge
• Enbridge shareholders will own approximately 57% of the combined entity. Spectra shareholders will own approximately 43%
• The acquisition results in cost savings of approximately US$415 million annually, increased scale of operations, balance sheet strength, financial flexibility and free cash flow that Enbridge hopes to capitalize on to fund future growth
• The combined entity has approximately 17,000 employees, and the acquisition is expected to reduce 1,000 jobs
• The only regulatory challenge presented by the Federal Trade Commission (FTC) was settled on February 16, 2017. The agreement allows a Commission-appointed monitor to prevent distribution of information about pipeline systems in the offshore Gulf of Mexico

Implications

This merger follows a recent trend, as North America has continued to become more interconnected in recent years and has exported large quantities of natural gas to countries such as Mexico. Consolidation for economies of scale, diversification of risk, and creation of more robust, balanced portfolios (including cross-border portfolios) is likely to continue.

More information:

Platts: Enbridge completes acquisition of Spectra Energy

Enbridge: Enbridge and Spectra Merger FAQs

FTC: FTC Preserves Competition in Merger of Enbridge Inc. and Spectra Energy Corp

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Additional Contributing Authors: Luke Williams, Tony Gonzalez