Mega-merger to create N America’s largest energy infra firm

Canada’s Enbridge is set to conclude a $28bn deal to buy Spectra Energy that would value the combined business at $128bn.

Canadian energy group Enbridge has agreed an all-stock deal to acquire US counterpart Spectra Energy for C$37 billion ($28 billion; €25 billion).

The merger will provide the combined entity with an enterprise value of about C$165 billion, making it North America’s largest energy infrastructure firm.

While it already owns the world's longest crude oil and liquids transportation system across Canada and the US, Enbridge will take on Spectra’s 21,000 miles of natural gas and crude oil pipelines, approximately 300 billion cubic feet of natural gas storage and 4.8 million barrels of crude oil storage.

Enbridge’s offer values Spectra at $40.33 per share – an 11.5 percent premium above Spectra’s closing price on Friday – in a deal that Enbridge chief executive Al Monaco described as making “strong strategic and financial sense”.

“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,” Monaco added. “This transaction is transformational for both companies and results in unmatched scale, diversity and financial flexibility with multiple platforms for organic growth.”

Enbridge began preparations for the deal two weeks ago when it filed an offering with the SEC, seeking to raise $7 billion. It also said it expects to divest $2 billion of non-core assets over the next 12 months to provide the firm with “additional financial flexibility”.

The merger comes as oil companies continue to look for ways to consolidate falling revenues amid persistently low energy prices. Japan’s JX Holdings and TonenGeneral Sekiyu KK last week agreed a merger to create the country’s largest oil refiner, while France’s Technip is in the process of finalising a $13 billion merger with US group FMC technologies.