Canadian pipeline operator TransCanada Corp, the company behind the controversial Keystone XL pipeline that was rejected by Washington, on Thursday announced a US$13 billion acquisition of Columbia Pipeline Group Inc of Houston, Texas.
The purchase price includes taking on Columbia’s US$2.8 billion in debt.
Under the agreement, Columbia shareholders will receive US$25.50 per share, which represents an 11 percent premium on its closing price on Wednesday on the New York Stock Exchange, TransCanada said in a statement.
There is currently an oversupply of pipelines in the US, and oil and gas asset valuations are at near-historic lows.
However, despite low energy prices, US natural gas production has continued to grow and is expected to continue to do so with expectations of more exports.
With the addition of Columbia’s 24,000km network, the combined company will oversee a North American pipeline grid of 91,000km linking the continent’s “most prolific natural gas supply basins to its most attractive markets,” TransCanada said.
Columbia has a natural gas network spanning the eastern US from New York to the Gulf of Mexico, and storage facilities in the Marcellus and Utica shale gas regions. These basins straddle the states of Ohio, New York, Pennsylvania and West Virginia in the Appalachian mountain range.
The agreement, which must still be endorsed by Columbia’s shareholders and regulatory authorities, is scheduled to come into force in the second half of the year.
In the short term, TransCanada plans to finance the transaction with a loan from a banking syndicate. The group will repay the loan by selling assets including its minority stake in gas pipelines in Mexico, as well as a new share issue.
Before the Columbia deal was announced, TransCanada’s stock closed 3.76 percent higher at US$38.08 in New York.
After failing last year to get US approval for its controversial Keystone XL project, TransCanada turned it focus to building up its North American network.
Keystone XL would have connected Canada’s landlocked Alberta oil sands to US Gulf Coast refineries.
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