Enbridge And Spectra Energy To Merge

(RTTNews) - Enbridge Inc. (ENB, ENB.TO) and Spectra Energy Corp (SE) announced that they reached a definitive merger agreement under which Enbridge and Spectra Energy will combine in a stock-for-stock merger transaction, which values Spectra Energy common stock at approximately C$37 billion or US$28 billion, based on the closing price of Enbridge's common shares on September 2, 2016.

Upon completion of the Transaction, Enbridge shareholders are expected to own approximately 57 percent of the combined company and Spectra Energy shareholders are expected to own approximately 43 percent. The combined company will be called Enbridge Inc.

The combination will create the largest energy infrastructure company in North America and one of the largest globally based on a pro-forma enterprise value of approximately C$165 billion or US$127 billion.

The Transaction was unanimously approved by the Boards of Directors of both companies and is expected to close in the first quarter of 2017, subject to shareholder and certain regulatory approvals, and other customary conditions.

As per the terms of the Transaction, Spectra Energy shareholders will receive 0.984 shares of the combined company for each share of Spectra Energy common stock they own. The consideration to be received by Spectra Energy shareholders is valued at US$40.33 per Spectra Energy share, based on the closing price of Enbridge common shares on September 2, 2016, representing an approximate 11.5 percent premium to the closing price of Spectra Energy common stock on September 2, 2016.

The combined company's C$74 billion (US$57 billion) organic growth platform is expected to support a highly visible dividend growth rate of 10-12 percent through 2024, including an anticipated aggregate increase of 15 percent in 2017 post closing, while maintaining a conservative payout of 50-60 percent of available cash flow from operations or ACFFO.

The combination is expected to achieve annual run-rate synergies of C$540 million or US$415 million, the majority of which should be achieved in the latter part of 2018. In addition, approximately C$260 million or US$200 million of tax savings can be achieved through utilization of tax losses commencing in 2019.

Upon closing of the Transaction, Al Monaco, President and Chief Executive Officer of Enbridge will continue to serve as President and Chief Executive Officer of the combined company.

Greg Ebel, President and Chief Executive Officer of Spectra Energy, will serve as non-executive Chairman of Enbridge's Board of Directors.

Enbridge's Board of Directors is expected to have a total of 13 directors consisting of 8 members designated by Enbridge, including Mr. Monaco, and 5 members designated by Spectra Energy, including Mr. Ebel.

The headquarters of the combined company will be in Calgary, Alberta. Houston, Texas will be the combined company's gas pipelines business unit center; Edmonton, Alberta will remain the business unit center for liquids pipelines, with gas distribution continuing to be based in Ontario.

On closing the Enbridge common shares to be issued in connection with the Transaction will be listed on the TSX and NYSE. Spectra Energy common stock will be delisted from the NYSE.

Enbridge expects the Transaction to be neutral to its 12 percent to 14 percent secured ACFFO per share CAGR guidance through the 2014-2019 time period, and strongly additive to its growth beyond that timeframe. Enbridge is committed to maintaining the financial strength of the combined company.

The funding program is designed to ensure strengthening of the balance sheet with the objective of maintaining strong investment grade credit ratings. Enbridge expects it will divest of approximately $2 billion of non-core assets over the next 12 months to provide additional financial flexibility.

At closing, Enbridge Energy Partners, LP and Spectra Energy Partners, LP are expected to continue to be publicly traded partnerships headquartered in Houston, Texas. Enbridge Income Fund Holdings will remain a publicly traded corporation headquartered in Calgary, Alberta.

The Transaction is expected to close in the first quarter of 2017 subject to the receipt of both companies' shareholder approvals, along with certain regulatory and government approvals.