Enbridge buying Spectra in $28 billion deal

Wed Sep 7, 2016 4:46am EDT
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By Richa Naidu and Sweta Singh

(Reuters) - Canada's Enbridge Inc said on Tuesday it would buy Spectra Energy Corp of Houston in an all-stock deal valued at about $28 billion (C$37 billion) to create the largest North American energy infrastructure company.

The takeover, the most significant energy deal since oil and natural gas prices crashed in mid-2014, highlights how pipeline companies are under pressure to merge as they grapple with overcapacity and sliding tariffs that have slowed dividend growth and unnerved investors.

Enbridge's biggest-ever deal will consolidate its leading position next to U.S. transport giants Kinder Morgan Inc and Plains All American Pipeline LP, which have seen their stock prices sink over the last two years as oil and gas producers slash spending on new wells.

Enbridge's pipelines mainly send Canadian oil sands to refiners on the U.S. Gulf Coast, while Spectra's network ships natural gas to the U.S. East Coast.

The deal has no serious antitrust problems as the companies' networks have "limited overlap," said Bruce McDonald, an antitrust expert with Jones Day law firm.

The U.S. Federal Energy Regulatory Commission did not comment.

Spectra shares leapt 13 percent to $40.89, their biggest jump in more than three years. Despite having risen some 50 percent since January on a partial recovery in oil and gas prices, Spectra's shares are still down 16 percent from a high of $43 hit in July 2014.

Enbridge's U.S.-listed shares rose 4.3 percent to $42.77 and its Toronto-listed shares bounced.   Continued...

The Enbridge Tower is pictured on Jasper Avenue in Edmonton in this August 4, 2012 file photo. REUTERS/Dan Riedlhuber/Files