TransCanada Corporation (NYSE:TRP) (TSE:TRP) signed an agreement to acquire Columbia Pipeline Group (NYSE:CPGX) for $25.50 per share or approximately $13 billion in cash including the assumption of its $2.8 billion of debt.
Columbia Pipeline Group is company based in Texas that operates around 15,000-mile or 24,000-kilometer network of interstate natural gas pipelines extending from New York to the Gulf of Mexico.
According to TransCanada, the $25.50 per share acquisition price represents an 11% premium to the $23 per share closing price of Columbia Pipeline’s stock on March 16.
The stock price of Columbia Pipeline closed $23.50 per share up by 2.17%. The stock climbed further by 5.32% to $24.75 per share after-hours on Thursday.
On the other hand, the shares of TransCanada increased 3.71% to $38.06 per share. However, the stock declined 4.10% to $36.50 per share in New York during the extended trading. The company’s stock climbed 2.64% to CAD$49.42 per share in Toronto.
A rare opportunity for TransCanada
In a statement, TransCanada President and CEO Russ Girling, said, “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.”
Girling added that Columbia Pipeline’s asset complement TransCanada’s existing footprint in North America. Combining the assets would create a 91,000-kilometer or 57,000-mile natural gas pipeline system.
Furthermore, Girling said, “We will be well positioned to transport North America’s abundant natural gas supply to liquefied natural gas terminals for export to international markets.”
The deal offers tremendous value for shareholders
TransCanada said the acquisition is expected to accretive to earnings per share in the first year of ownership. Its $13.5 billion portfolio of near-term investment opportunities combined with Columbia Pipeline’s $9.6 billion commercially secured projects and around $250 million targeted annual cost revenue, and financing benefits could deliver significant shareholder value in the future.
Columbia Pipeline Chairman and CEO Robert Skaggs, Jr., said, “This transaction delivers tremendous value to our shareholders” and puts the company “within a leading energy platform that can maximize the value of our strategic positioning and deep inventory of transformational growth projects.”
TransCanada expected to close the transaction in the second half of 2016, which subject to shareholder approval, certain regulatory and government approvals and customary closing conditions.