Enbridge to buy Spectra in $28B deal

NEW YORK (AA) – Canadian energy firm Enbridge is set to buy Houston-based Spectra Energy in a $28 billion agreement, the companies announced Tuesday.

The deal is expected to create "the largest energy infrastructure company in North America" with $127 billion, in market value of the joint enterprise, which will have assets in crude oil, oil liquids, natural gas terminal and pipelines, midstream operations and in renewable power generation, according to a joint statement.

In an environment of low energy prices where companies are troubled with cash flows and lower investments, the agreement is expected to allow the joint company to "have the scale, balance sheet strength, financial flexibility and free cash flow to comfortably fund future growth," the statement noted.

The agreement, which is set to close sometime in the first quarter of 2017, was unanimously approved by the boards of both companies.

After completion, Enbridge shareholders will hold 57 percent of the combined company, Spectra Energy shareholders will have 43 percent. The joint company will be named Enbridge Inc.

Al Monaco, President and CEO of Enbridge Inc., said the "transformational” deal provides "diversity" and "financial flexibility" for growth.

Monaco noted that the combined value of projects in execution phase of both companies are around $20 billion, while a further $37 billion-worth projects are currently under development.

"The combination of Enbridge and Spectra Energy creates what we believe will be the best, most diversified energy infrastructure company in North America," said Greg Ebel, the current President and CEO of Spectra Energy, who will become chairman of Enbridge after the deal is closed.

Enbridge operates approximately 33,000 miles (53,000 kilometers) of oil and natural gas pipelines in Canada and the U.S.

Spectra has about 21,000 miles (34,000 kilometers) of oil and gas pipelines, gas storage capacity of 300 billion cubic feet (8.5 billion cubic meters) and 4.8 million barrels of crude oil storage.

Enbridge’s stock price jumped 4.7 percent to $42.91 a share in the U.S. stock market after news of the deal. Stocks of Spectra Energy soared 13.7 percent to $41.11.