TransCanada, which failed to win approval for the controversial KeyStone XL Pipeline, has agreed to acquire Columbia Pipeline for $10.2 billion, though the deal is valued at $13 billion when including the assumption of debt.
The acquisition is expected to wrap in the second half of this year, subject to regulatory approval and other usual conditions. If everything goes as planned, TransCanada will become one of the largest movers of natural gas in the U.S.
TransCanada is offering $25.50 per share in cash for each share in Columbia Pipeline. That's about an 11 percent premium based on Columbia Pipeline's closing share prices on the New York Stock Exchange on March 16.
"This transaction delivers tremendous value to our shareholders and places Columbia Pipeline Group within a leading energy platform that can maximize the value of our strategic positioning and deep inventory of transformational growth projects," said Columbia Pipeline CEO and Chairman Robert C. Skaggs, Jr.
The addition of Columbia Pipeline's hold of 15,000 miles of gas pipeline, extending from the Gulf of Mexico to New York, gives TransCanada a network of oil and gas pipes that spans about 57,000 miles.
Columbia Pipeline's footprint in the northeastern U.S. offered TransCanada a lucrative opportunity to claim territory in the Utica and Marcellus shale gas region, according to Russ Girling, CEO of TransCanada.
"The assets complement our existing North American footprint which together will create a 91,000-kilometre (57,000-mile) natural gas pipeline system connecting the most prolific supply basins to premium markets across the continent," Girling. "At the same time, 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 offer TransCanada a high rate of return at a time in which it has seen it pipelines fall from 7 billion cubic feet of natural gas per day in 2000 to 3 billion cubic feet per day in 2015. The deal also takes out a rival.
Last year, TransCanada failed in its seven-year bid to win approval for the controversial Keystone XL pipeline. A few months ago, President Barack Obama issued an executive order blocking the deal to construct the massive pipeline.
The pipeline would have moved oil from Canada oil sand, down the middle of the U.S. to the Gulf of Mexico.