Under the terms of the all-cash deal, unanimously approved by both companies’ boards, Columbia shareholders will receive $25.50/common share.
The acquisition is expected to close in this year’s second half, subject to Columbia shareholder approval and certain regulatory and government approvals, including compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the satisfaction of customary closing conditions.
Upon closing, Columbia will become an indirect wholly owned subsidiary of TransCanada and will cease to be a publicly held corporation.
Columbia operates a 15,000-mile network of interstate natural gas pipelines extending from New York to the Gulf of Mexico, with a strong presence in the Appalachia production basin.
The firm owns Columbia Gas Transmission, which operates 11,300 miles of pipelines and 286 bcf of storage capacity in the Marcellus and Utica shale regions; and Columbia Gulf Transmission, a 3,300-mile pipeline system that extends from Appalachia to the Gulf Coast.
“The assets complement our existing North American footprint, which together will create a [57,000-mile] natural gas pipeline system connecting the most prolific supply basins to premium markets across the continent,” explained Russ Girling, TransCanada's president and chief executive officer.
“At the same time, we will be well-positioned to transport North America’s abundant natural gas supply to LNG terminals for export to international markets,” he said.
Columbia is currently advancing $5.6 billion of commercially secured projects, underpinned by long-term contracts and subject to normal course regulatory and permitting processes. Under agreements with customers, additional growth is also expected from $1.7 billion of modernization initiatives to be implemented through 2021.
“With a combined portfolio of $23 billion in near-term projects secured by cost of service regulation or long-term contracts, we are well positioned to generate significant growth in earnings into the next decade,” said Girling.
Deal’s financing, funding
TransCanada expects portfolio management to play a key role in the permanent financing of the acquisition through the planned monetization of US Northeast merchant power assets and a minority interest in its Mexican gas pipeline business.
By 2018, the firm will have five major pipeline systems in Mexico representing investment of $3 billion (OGJ Online, Nov. 11, 2015).
The proceeds from asset sales, along with new common equity proportionate to the size of this transformative transaction, are expected to cover the required funding. As an interim measure, TransCanada has bridge term loan credit facilities in place for up to $10.3 billion with a syndicate of lenders.
“TransCanada intends to fund the acquisition and our significant future growth program in a manner that maintains our strong financial position,” said Girling.