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TransCanada Acquires Columbia Pipeline For $13 Billion To Dominate Energy Sector In North America

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(Credit: Brett Gundlock/Bloomberg/Getty Images) A warning sign for the Keystone Pipeline stands outside of the TransCanada Corp. Hardisty Terminal 1 in Hardisty, Alberta, Canada, on Saturday, Dec. 7, 2013. Canadian heavy crude reached its strongest level in more than two months on the spot market as a pipeline connection to the U.S. Gulf Coast began filling with crude ahead of its startup next month.Operations At The TransCanada Hardisty Terminal 1 Facility
March 19
12:07 AM 2016

TransCanada Corporation, the Calgary-based North American energy company, has announced on Thursday its acquisition of Columbia Pipeline Group (CP) for $10.2 billion. The announcement appears after the energy infrastructure developer has failed to obtain approval for building the controversial Keystone XL oil pipeline. Through acquiring the gas transmission company, TransCanada implements another plan for growing in the US.

The deal is expected to offer TransCanada a strategic position in the most promising regions in the US for gas production growth. The regions include Marcellus and Utica shales of Pennsylvania, Ohio and West Virginia. Columbia has already started implementing $5.6 billion expansion project compared to TransCanada's negligible efforts in this regard before making the deal, reports Financial Times.

TransCanada observes the deal as a rare, attractive opportunity for transforming it as one of the largest natural gas businesses in the North America. Columbia's largest major assets include 11,300 miles pipelines and 286 billion cubic feet of natural gas storage facilities in the Marcellus and Utica shale gas regions. After closure of the acquisition, TransCanada will own about 57,000 miles of gas pipelines, according to a report published in The New York Times.

Under the deal, the Calgary based energy giant will pay $25.50 against each share to the Columbia holders. The dealt price represents a 10.9% premium with the Columbia's closing price on March 16.

The Canadian energy company also assumes debt for around $2.8 billion. The purchase will be funded from the proceeds of asset sales and C$4.2 billion ($3.2 billion) through offering new shares, reports Bloomberg citing a TransCanada statement of Thursday as the source.

The takeover also appears in the midst of heightened merger and acquisition activities in the US pipeline space during the recent years. Energy Transfer Equity LP has announced last September purchasing Williams Cos. for $58 billion, the largest deal within a decade. However, deals worth around $2.3 billion in the energy sector have already been announced in 2016.

Wells Fargo & Co. appears as the exclusive financial adviser for TransCanada while Goldman Sachs & Co. and Lazard Ltd. advise Columbia over financial matters. Mayer Brown LLP, Blake, Cassels & Graydon LLP and Osler, Hoskin & Harcourt LLP are the legal advisers of TransCanada. Meanwhile, Sullivan & Cromwell LLP has advised Columbia over legal affairs.

TransCanada has found another way of expanding across the US through acquiring Columbia for $13 billion.  Earlier, the energy infrastructure developer has failed to obtain approval for building the controversial Keystone XL oil pipeline. The deal is expected to offer TransCanada a strategic position in the most promising regions in the US for gas production growth.

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