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Enbridge-Spectra Merger Done; FTC Agreement Settled GOM Concerns
Calgary-based Enbridge Inc. has completed its acquisition of Houston-based Spectra Energy Corp. in a stock-for-stock deal.
Trading of Spectra shares was suspended as of market opening Monday.
The planned combination was announced last September. It brings together liquids-heavy Enbridge with mostly natural gas-focused Spectra and makes the largest energy infrastructure company in North America — and one of the largest in the world — with an enterprise value of about US$127 billion.
Earlier this month the Federal Trade Commission (FTC) approved the tie-up. The approval followed settlement of FTC charges that the combination would harm competition in the market for natural gas transportation in three production areas off the coast of Louisiana in the Gulf of Mexico.
According to the FTC complaint, the merger likely would reduce pipeline competition in Green Canyon, Walker Ridge and Keathley Canyon. This would lead to higher prices for natural gas pipeline transportation from those areas. In portions of the affected areas, the FTC alleged, the companies control the two pipelines located closest to certain wells and, as a result, would likely be the lowest-cost pipeline transportation options for those wells. Under the settlement with the FTC, the companies agreed to conditions that will preserve competition in those areas, FTC said.
The proposed transaction was initially valued at $28 billion when it was announced in September. Enbridge is the sole owner and operator of the Walker Ridge Pipeline. Through its indirect stake in DCP Midstream Partners LP. Houston-based Spectra indirectly owns a 40% interest in the Discovery Pipeline.
FTC said the merger would give Enbridge an ownership interest in both pipelines, which would give it access to competitively sensitive information of the Discovery Pipeline, as well as significant voting rights over the Discovery Pipeline.
The agreement resolved the anticompetitive concerns by requiring Enbridge to establish firewalls to limit its access to non-public information about Discovery. Board members of the Spectra-affiliated companies that hold a 40% share in Discovery must recuse themselves from any vote involving the pipeline, with two limited exceptions. Also under the order, Enbridge must notify FTC before acquiring an ownership interest in any natural gas pipeline operating in the Green Canyon, Walker Ridge and Keathley Canyon areas, or increasing the 40% ownership interest of Spectra affiliate DCP Midstream in Discovery Pipeline.
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