Enbridge Acquiring Spectra Energy in $28 Billion Deal

Enbridge, September 6, 2016

Enbridge Inc. and Spectra Energy Corp. have announced that they have entered into a definitive merger agreement under which Enbridge and Spectra Energy will combine in a stock-for-stock merger transaction (the "Transaction"), which values Spectra Energy common stock at approximately US$28 billion (C$37 billion) , based on the closing price of Enbridge's common shares on September 2, 2016. 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 US$127 billion (C$165 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.

Under 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. 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.

This combination brings together two highly complementary platforms to create North America's largest energy infrastructure company and meaningfully enhances customer optionality. With an asset base that includes a diverse set of best-in-class assets comprised of crude oil, liquids and natural gas pipelines, terminal and midstream operations, a regulated utility portfolio and renewable power generation, the combined company will be positioned to provide integrated services and first and last mile connectivity to key supply basins and demand markets. On a combined basis for the 12 months ended June 30, 2016, the company would have generated combined revenues in excess of C$40 billion (US$31 billion) and combined Earnings before Interest and Taxes (EBIT) of US$4.4 billion (C$5.8 billion), and will have the scale, balance sheet strength, financial flexibility and free cash flow to comfortably fund future growth. 

"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," said Al Monaco, President and Chief Executive Officer, Enbridge Inc. "We are accomplishing that goal by combining with the premier natural gas infrastructure company to create a true North American and global energy infrastructure leader. This Transaction is transformational for both companies and results in unmatched scale, diversity and financial flexibility with multiple platforms for organic growth.

Greg Ebel, President and Chief Executive Officer of Spectra Energy, who will become chairman of Enbridge following the closing of the Transaction, said, "The combination of Enbridge and Spectra Energy creates what we believe will be the best, most diversified energy infrastructure company in North America, if not the world. This is an incredible opportunity for both companies and we at Spectra Energy could not be more excited about what it means going forward. Together, the merged company will have what we believe is the finest platform for serving customers in every region of North America and providing investors with the opportunity for superior shareholder returns."

Mr. Monaco added, "Bringing Enbridge and Spectra Energy together makes strong strategic and financial sense, and the all-stock nature of the Transaction provides shareholders of both companies with the opportunity to participate in the significant upside potential of the combined company. With combined secured projects in execution of C$26 billion (US$20 billion) and another C$48 billion (US$37 billion) of projects under development, the Transaction allows us to extend our anticipated 10-12 percent annual dividend growth through 2024. We believe our combination of best-in-class assets, superior growth and strong commercial underpinning of our business will be unrivaled in our sector. Importantly, we will preserve and enhance our shareholder value proposition, which centers on delivering consistent growth with a low-risk business model. This is also a combination of two companies, management and staff that have a shared vision and talented teams that are dedicated to serving customers and providing the energy that people want and need, safely and reliably every day. We look forward to welcoming Spectra Energy employees to Enbridge as we move forward as one company. In building on our existing strengths by joining with Spectra Energy, Enbridge will be very well positioned for future growth and continued value creation."

Mr. Ebel added, "The strength of the combined company will support a large capital program to fund the continued development of Spectra Energy's existing, preeminent project inventory in addition to allowing the combined company to compete for and win the most attractive new growth projects - all while maintaining expected strong dividend growth with exceptional coverage. The transaction premium recognizes the strength of Spectra Energy's world-class natural gas pipeline system and significant expansion program, while providing shareholders the opportunity to participate in the unparalleled value creation potential of the combined company. While our assets are largely complementary, our values are shared, and together we will create a best-in-class company for shareholders, employees, customers, and communities alike."

Compelling Value Proposition 

    • Six leading strategic growth platforms: The combined company brings together many of the highest quality energy infrastructure assets in North America: liquids and gas pipelines; US and Canadian midstream businesses; a top tier regulated utility portfolio; and a growing renewable power generation business. A map of the assets of the combined entity is available at and
    • Secure, low-risk commercial structure with stable long-term cash flow visibility: 96 percent of pro-forma free cash flow is underpinned by long-term commercial agreements (cost-of-service, take-or-pay, of fixed fee); 93 percent of customers are strong, investment grade or equivalent counterparties; less than 5 percent of combined pro-forma cash flow will have direct exposure to commodity price risk.
    • Largest and most secure program of diversified organic growth projects in the industry: Together, Enbridge and Spectra Energy bring C$26 billion (US$20 billion) in secured capital and a C$48 billion (US$37 billion) inventory of probability weighted projects in development. 
    • Strong balance sheet, growing cash flow and access to capital markets to fund large capital program:The combination is expected to result in sufficient internally generated cash flow to fund growth and improve balance sheet strength. Enbridge will have multiple, cost-effective funding sources and be even more competitive in capturing opportunities. 
    • Attractive dividend yield with visible organic dividend growth: 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 (ACFFO). This provides an industry leading total return driven by a strong, low-risk dividend yield.
    • Achievable cost synergies: The combination is expected to achieve annual run-rate synergies of C$540 million (US$415 million), the majority of which should be achieved in the latter part of 2018. In addition, approximately C$260 million (US$200 million) of tax savings can be achieved through utilization of tax losses commencing in 2019.
    • Complementary businesses, shared culture and values support smooth integration: Enbridge and Spectra Energy have similar business and operational models, talented teams, common cultures and values, including shared commitment to safety, stewardship of the environment, meaningful stakeholder engagement and investing in communities.


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, including compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and approval under Canada Competition Act, and the satisfaction of other customary closing conditions. 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.


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