Enbridge (TSX: ENB) has agreed to acquire Spectra Energy (NYSE: SE) in a stock-for-stock transaction valuing Spectra at approximately $28 billion. The combination will create the largest energy infrastructure company in North America, with an enterprise value of approximately $127 billion and $57 billion worth of secured project and risked development inventory. Existing Enbridge shareholders will own about 57% of the new business, with current Spectra shareholders owning the remaining 43%. The deal is expected to close during 1Q 2017.
The deal between the two pipeline businesses joins Enbridge’s capacities in sourcing and shipping crude oil with Spectra’s natural gas assets. In an environment with slow growth and low energy prices, increased scrutiny of large projects like TransCanada's Keystone XL pipeline and growing profitability of renewable energy, the merger is ostensibly a diversification play. In addition to oil & gas pipelines, the merged company will own a utility portfolio and a midstream energy portfolio. Enbridge shares closed Tuesday up 3.9%, at $43.6 apiece, while Spectra stock climbed 13.42% to close at $41 a share.