© 2016 The Texas Lawbook.
By Natalie Posgate
(Sept. 7) – Two energy companies – either headquartered or with a significant presence in Houston – announced their combination via a $28 billion mega deal Tuesday, but neither party turned to any lawyers based in the Lone Star State to negotiate the transaction.
Canada-based Enbridge Inc. said yesterday that it is purchasing Houston-based Spectra Energy Corp. in an all-stock transaction. The deal represents the level of consolidation that energy M&A lawyers have recognized as a possibility since commodity prices plummeted in late 2014.
“It’s just the dynamic of companies who have money who are not over-levered. They’re sitting in cash,” Locke Lord partner Jason Schumacher, who was not involved in this deal, told The Texas Lawbook in an interview earlier this year. “They will take out those who bought assets in 2013 and 2014 with debt.”
Spectra shares leapt 13 percent after the deal announcement, its biggest jump in three years, according to a report by Reuters. But Spectra shares are still down 16 percent from its peak of $43 per share in July 2014.
If the Enbridge-Spectra deal closes, it will be the largest consolidation in the energy industry to succeed since oil prices dropped. The companies said in a joint release that the combination will create the largest energy infrastructure company in North America. The combined company will have a $127 billion enterprise value.
The next largest – which involved Texas M&A lawyers – was the $35 billion Hallburton-Baker Hughes merger, which was announced in November 2014 and fell apart in May of this year for a $3.5 billion termination fee.
The next largest to involve Texas M&A lawyers, according to The Texas Lawbook’s Corporate Deal Tracker, was Energy Transfer Equity’s September 2015 $38 billion merger with The Williams Companies, which fell apart in June and resulted in a contentious legal battle between the two energy giants.
Canada-based Enbridge, which has its head U.S. office in Houston, turned to New York-based Sullivan & Cromwell and Toronto-based McCarthy Tétrault to handle legal matters for its end of the deal.
Spectra hired New York-based Wachtell, Lipton, Rosen & Katz and Toronto-based Goodmans to lead its end of the deal, as well as Boston- and Washington, D.C.-based lawyers from Skadden, Arps, Slate, Meagher & Flom for tax matters.
The financial advisors for Enbridge were Credit Suisse (Canada), Inc. and RBC Capital Markets. BMO Capital Markets and Citi served as joint lead financial advisors for Spectra’s board of directors.
Spectra’s deputy general counsel, Patricia Rice, announced her departure from the company last month. She worked at Spectra for almost a decade. Spectra General Counsel Reggie Hedgebeth formerly worked at King & Spalding and currently serves on the board of directors for Brink’s, a large American security and protection company.
The deal is expected to close in the first quarter of 2017. The headquarters of the combined company will be in Calgary, Alberta. Houston will be home to the combined company’s gas pipelines business unit. Edmonton, Alberta will remain the business unit center for liquids pipelines, with gas distribution continuing to be based in Ontario.
The deal has already been unanimously approved by Enbridge’s and Spectra’s boards of directors. Enbridge CEO Al Monaco will continue his role as head of the combined company.
Upon closing, both Enbridge’s and Spectra’s master limited partnerships are expected to continue as publicly traded partnerships headquartered in Houston.
© 2016 The Texas Lawbook. Content of The Texas Lawbook is controlled and protected by specific licensing agreements with our subscribers and under federal copyright laws. Any distribution of this content without the consent of The Texas Lawbook is prohibited.
If you see any inaccuracy in any article in The Texas Lawbook, please contact us. Our goal is content that is 100% true and accurate. Thank you.