By the OGJ Online Staff
HOUSTON, Mar. 17--Enbridge Inc., Calgary, and Midcoast Energy Resources Inc., Houston, said Friday they have agreed to a merger under which Enbridge will buy the stock of Midcoast for $27/share (US).
That represented a 7% premium over Midcoast's closing price of $25.20 on Thursday.
Enbridge will pay $350 million for the stock and will assume $250 million of Midcoast's long-term debt, resulting in a total transaction value of $600 million.
The transaction is subject to approval by Midcoast shareholders and is expected to close by the end of the second quarter. Enbridge said persons holding 12% of the Midcon shares have agreed to vote for the transaction.
Enbridge Inc. operates a crude oil and liquids pipeline system in Canada and the US and has a growing involvement in gas transmission and midstream businesses.
Midcoast transports, gathers, processes and markets natural gas and other petroleum products through more than 80 company owned intra and interstate pipelines totaling 4,100 miles in 10 states, Canada, and the Gulf of Mexico.
Enbridge and its US subsidiary, Lakehead Pipe Line Co. Inc. (the general partner of Lakehead Pipe Line Partners LP), have a strategy of utilizing the partnership as a vehicle to acquire energy transportation assets, including purchase of such assets from other Enbridge affiliates.
Enbridge said while no decisions have been reached, the Midcoast acquisition will expand the portfolio of assets available for possible transfer to the Lakehead Partnership.
Patrick Daniel, Enbridge president and CEO, said, "The risk profile of Midcoast's business is similar to Enbridge with limited exposure to natural gas or natural gas liquids commodity prices.''
Daniel said Dan Tutcher, president and CEO of Midcoast, and his staff will be retained in Houston.
Enbridge said the acquisition will contribute earnings of $30 million (Can.)/year and earnings of 5� (Can.)/share in 2002.
