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TransCanada Acquired Columbia Pipeline Group for $13 Billion

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The deal

On March 17, 2016, TransCanada (TRP) announced the acquisition of Columbia Pipeline Group (CPGX) in an all-cash deal. TransCanada will pay $25.5 per Columbia Pipeline Group share. This represents an 11% premium to the closing price of Columbia Pipeline Group shares of $23.0 as of March 16, 2016, and a 32% premium to the volume-weighted average price over the last 30 days.

The transaction is valued at $13 billion including the assumption of $2.75 billion of Columbia Pipeline Group debt. The acquisition is expected to close in 2H16. It’s subject to customary closing conditions.

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Columbia Pipeline Group stock rose

Columbia Pipeline Group stock closed 2.2% higher on March 17. It rose ~5% in after-hours trading. As the above graph shows, the stock surged last week due to news about possible ongoing merger talks. Columbia Pipeline Partners (CPPL) closed 3.4% up and gained 6.3% in after-hours trading. According to the companies, Columbia Pipeline Partners—whose general partner is currently owned by Columbia Pipeline Group—will remain a publicly traded MLP after the acquisition.

TransCanada closed 3.8% higher on March 17. However, it fell ~4% in after-hours trading.

Columbia Pipeline Group is engaged in regulated gas transportation and storage services for local distribution companies, marketers, producers, and industrial and commercial customers. The company’s unregulated businesses include midstream services. This includes the gathering, processing, compression, and development of mineral rights positions. Columbia Pipeline Group accounts for ~2.3% of the Guggenheim S&P 500 Equal Weight Energy ETF (RYE)Read Six Months Deep, What’s the Scoop on Columbia Pipeline Group? to learn more about Columbia Pipeline Group.

Consolidation in the energy sector

The energy sector is witnessing some consolidation amid sustained low energy prices and a challenging environment. Energy Transfer Equity (ETE) announced plans to merge with Williams Companies (WMB) in September 2015. Read more on it in A Complete Guide to the Energy Transfer–Williams Merger.

In this series, we’ll take a deeper look at the deal, its strategic rationale, and financials. First, let’s understand the rationale behind the deal.

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