Canadian Manufacturing

AltaGas acquiring U.S. energy firm WGL in blockbuster $8.4B deal

The deal expands Calgary-based AltaGas' holdings in the prolific Marcellus shale formation in northeastern U.S., and adds some clean power capacity



CALGARY—AltaGas Ltd. is buying WGL Holdings Inc. for $6 billion in the latest Canadian blockbuster takeover of a U.S. energy company.

The company says the transaction, which will include $2.4 billion of debt on top of the purchase price, should close by mid 2018.

“We are fortunate to be buying a storied company with nearly 170 years of history, which in many ways is nearly the mirrored image of AltaGas,” said company chief executive David Harris on an analyst call Wednesday.

Harris said the deal would allow Calgary-based AltaGas to expand its energy infrastructure portfolio in North America, particularly in the prolific Marcellus shale formation in northeastern U.S. as well as in clean power.

“This transaction is highly transformative for our company by increasing both our scale and breadth of quality assets, while maintaining our corporate DNA,” said Harris.

Washington, D.C.-based WGL Holdings was created in 1848 as the Washington Gas Light Company and is now the parent company of natural-gas utility Washington Gas, which supplies the U.S. capital region.

WGL also owns extensive pipeline and energy storage assets, as well as wind and solar projects that would match well with AltaGas’s own hydro, battery storage, and other renewable assets.

“The combined company will be a leader in the advanced energy economy,” said John O’Brien, president of AltaGas Services in the U.S., in a media conference call.

Under the deal, WGL Holdings will keep its U.S. office and staff and AltaGas will relocate the headquarters of its U.S. power business to WGL’s service region.

This multibillion-dollar takeover of an American company is just the latest major foray of Canadian companies down south.

Last March TransCanada Corp. announced it was taking over the Columbia Pipeline Group for US$10.2 billion, while Enbridge Inc. agreed to the $37-billion takeover of Spectra Energy last September in what was the largest ever foreign takeover by a Canadian company.

O’Brien said he didn’t expect to encounter push back from President Donald Trump’s administration on the foreign takeover of the U.S. company, in part because AltaGas is already operating there and plans to expand.

“We think that’s really positive. That we’re already here, and want to grow here,” said O’Brien.

As to the company’s clean energy aspirations under an administration that’s intent on cutting back on climate change efforts and boosting fossil fuels, O’Brien said there will still be customers interested in reducing emissions.

“There are exciting technologies out there that customers want, and we’ll be able to make smart investment decisions,” he said.

In the AltaGas deal, WGL shareholders would receive US$88.25 in cash per WGL share, which represents an 11.8 per cent premium to WGL’s closing share price on Tuesday.

AltaGas also announced a $2.5-billion financing Wednesday to help pay for the deal, and plans to later offer debt, preferred shares and some asset sales to help cover costs.

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