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TORONTO (miningweekly.com) – Canadian oil and natural gas pipeline operator TransCanada has agreed to buy Houston, Texas-based Columbia Pipeline Group, which operates a network of 24 000 km of interstate natural gas pipelines extending from New York to the Gulf of Mexico, with a significant presence in the Appalachia production basin.
"The acquisition represents a rare opportunity to invest in an extensive, competitively-positioned, growing network of regulated natural gas pipeline and storage assets in the Marcellus and Utica shale gas regions," TransCanada president and CEO Russ Girling stated.
Under the terms of the all-cash deal, unanimously approved by both companies’ boards, Columbia shareholders would receive $25.50 a common share, an 11% premium based on Columbia's closing stock price on the NYSE on Wednesday of $23 a share and a 32% premium to the volume-weighted average price over the last 30 days. TransCanada would also assume about $2.8-billion of debt.
The deal, announced on Thursday, was subject to Columbia shareholder approval and certain regulatory approvals.
"The assets complement our existing North American footprint which together will create a 91 000 km natural gas pipeline system connecting the most prolific supply basins to premium markets across the continent. At the same time, we will be well positioned to transport North America's abundant natural gas supply to liquefied natural gas terminals for export to international markets,” Girling advised.
TransCanada expected the acquisition, net of associated financing and portfolio management, to be accretive to earnings a share in the first full year of ownership. Looking forward, TransCanada's C$13.5-billion portfolio of near-term investment opportunities together with Columbia's C$9.6-billion of commercially secured projects, and about $250-million of targeted yearly cost, revenue and financing benefits, were expected to deliver significant shareholder value over the next few years.
TransCanada said it expected to fund the acquisition through selling certain US Northeast merchant power assets and a minority interest in its Mexican natural gas pipeline business. The proceeds from asset sales, along with new common equity equal to the size of the transaction, were expected to comprise the required funding while maintaining the company's financial strength and flexibility. As an interim measure, TransCanada had bridge term loan credit facilities in place for up to $10.3-billion with a syndicate of lenders.
The acquisition was expected to close in the second half of 2016.
Wells Fargo Securities acted as exclusive financial adviser to TransCanada. Mayer Brown, Blake, Cassels & Graydon and Osler, Hoskin & Harcourt were legal advisers to TransCanada.
Goldman, Sachs & Co acted as lead financial adviser and Lazard Frères & Co acted as financial adviser to Columbia. Sullivan & Cromwell acted as legal counsel to Columbia.