North America is about to see a merged company take the title as the region’s largest energy infrastructure company.
The Houston-based Spectra Energy (NYSE:SE) is being bought by Canadian pipeline giant Enbridge (NYSE:ENB) in an all-stock deal worth $28 billion.
The titanic size of the business is all the more remarkable as it comes at a time when energy-industry operators continue to deal with the fallout from low oil prices.
Spectra Energy shareholders will receive shares of Calgary-based Enbridge valued at around $40.33 each, or a premium of about 11.5%, based on the closing price of Enbridge shares on Friday.
The deal links up crude-hauling heavyweight Enbridge with Spectra’s natural gas focused network, which will create a more diverse and stable company, the companies said Tuesday.
The strategy is a sage one for the new partners. Diversifying is more important as pipeline operators face the fallout of a prolonged rout in energy prices. Even though many pipeline companies have take-or-pay contracts that protect their revenue when commodity prices fall, the slump has dimmed the once bright growth outlook for pipeline companies.
Spectra and Enbridge, like many other pipeline operators, have both struggled to build new lines during the downturn, in part because of low prices and regulatory obstacles.
Spectra shares were up 13.4% at $41 on Tuesday. Enbridge shares were 5% higher at $43.05.
Meanwhile, another takeover offer was grinding on. Germany's Bayer raised its bid for biotech behemoth Monsanto (NYSE:MON) to $127.50 per share, up from its prior $125 per share.
The agricultural chemical and seeds company said it was having "constructive" discussions with Bayer about a possible deal. But it also looked like a deal was imminent as Monsanto told Bayer that the revamped offer was “close” on price. Reports suggested a deal could happen within a week or two.
In July, Bayer raised its earlier offer of $122 per share to $125 to put Monsanto under pressure to engage further.
Monsanto subsequently turned down Bayer's $125 a share offer, but said it was open to further talks with the German company, as well as other parties.
But Monsanto shares were down 1.2% at $106.15 in New York.