Leading midstream energy companies Spectra Energy Corp. and Enbridge Inc. (ENB - Free Report) have decided to merge with an aim to create the largest energy infrastructure company in North America. The deal will likely be closed by the first quarter of 2017.
Per the transaction, Spectra Energy will be acquired by Enbridge in all stock deal valued as high as $28 billion. In detail, shareholders of Spectra Energy will get 0.984 shares of the combined entity – in which Enbridge will have a 57% ownership and Spectra Energy will have the remaining 43% interest – for every common stock they hold.
The combination will also form one of the largest global energy infrastructure firms with the merger of the two companies’ highly complementary platforms. With a diverse base of assets that comprises crude, liquids and natural gas pipelines along with terminal and midstream operations, the merged entity will be able to reach key supply basins and markets.
Investors should know that as of Jun 30, 2016, midstream players on a combined basis generated huge revenues of over $31 billion. The combined firm is also believed to have solid balance sheets and enough cash flow generating capacity to finance future growth projects. Moreover, the merger will combine two secured giant projects worth $20 billion and $37 billion that are under development.
Following all these positive developments that will also create significant cost synergies, the joined entity will be in a position to provide 10% to 12% yearly dividend growth through 2024.
Houston, TX-based Spectra Energy through its subsidiaries and equity affiliates, engages in the ownership and operation of a portfolio of complementary natural gas-related energy assets. Canadian firm Enbridge is the operator of the longest oil and liquids transportation system of the world.
Currently, Spectra Energy carries a Zacks Rank #3 (Hold) while Enbridge holds a Zacks Rank #2 (Buy).
Apart from Enbridge, two other players in the energy sector that warrant a look are Murphy USA Inc. (MUSA - Free Report) and Matador Resources Company (MTDR - Free Report) . Both stocks sport a Zacks Rank #1 (Strong Buy).
SPECTRA ENERGY CORP Price and Consensus
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>