Merger of Enbridge (TSE:ENB) and Spectra Energy gets green light from FTC

The U.S. Federal Trade Commission (FTC) has approved the proposed merger of pipeline companies Enbridge Inc (TSE:ENB, Mkt cap 51.91B, P/E 28.03, Div/yield 0.58/4.20, EPS 1.98, Shares 943.19M) and Spectra Energy Corp.

To secure the regulator's approval, the two companies agreed to certain actions designed to address concerns that the tie-up would harm competition in the market for pipeline transportation of natural gas in three production areas in the Gulf of Mexico.

The FTC had claimed that the $28bn merger was likely to reduce natural gas pipeline competition in Green Canyon, Walker Ridge and Keathley Canyon, leading to higher prices for natural gas pipeline transportation from those areas. In parts of the affected areas, the FTC said that the two companies' pipelines are the two located closest to certain wells and, as a result, are likely 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.

Competition concerns were raised because Canada-based Enbridge is the sole owner and operator of the Walker Ridge Pipeline, while Houston-based Spectra — through its indirect stake in DCP Midstream Partners — indirectly owns a 40% interest in the Discovery Pipeline.

The proposed merger will give Enbridge an ownership interest in both pipelines, providing "access to competitively sensitive information of the Discovery Pipeline, as well as significant voting rights over the Discovery Pipeline," the FTC pointed out.

"Access to its competitor's competitively sensitive information and significant voting rights would provide Enbridge with the incentive and opportunity to unilaterally increase pipeline transportation costs for natural gas producers located in the affected areas. The exchange of information also may increase the likelihood of tacit or explicit anticompetitive coordination between the Walker Ridge Pipeline and the Discovery Pipeline."

To address this issue, Enbridge and Spectra Energy have agreed, following the close of their merger, to enact firewalls governing the flow of certain information to Enbridge about the Discovery natural gas pipeline system, and to take certain other steps limiting Enbridge's potential influence over actions related to Discovery.

With this clearance from the FTC, the final regulatory requirement for closing is clearance under the Canadian Competition Act.

Enbridge and Spectra expect the merger to be completed before the end of the first quarter of 2017.

Enbridge Inc (TSE:ENB) is a Calgary-based energy transportation and distribution company. The Company operates in five segments: Liquids Pipelines; Gas Distribution; Gas Pipelines, Processing and Energy Services; Sponsored Investments, and Corporate. Liquids Pipelines segment owns and operates crude oil and other liquid hydrocarbons pipelines and terminals. Gas Distribution consists of the Company's natural gas utility operations. Gas Pipelines, Processing and Energy Services segment consists of investments in natural gas pipelines, gathering and processing facilities and the Company's energy services businesses, along with renewable energy and transmission facilities. Sponsored Investments includes the Company's 33.7% economic interest in Enbridge Energy Partners, L.P. (EEP), and Enbridge's interests in both the Eastern Access and Lakehead System Mainline expansion projects held through Enbridge Energy, Limited Partnership (EELP). The Corporate segment includes an investment in Noverco Inc. More from Reuters »

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