Duke Energy to Pay $3.5 Billion for Canada’s Westcoast Energy

Duke Energy Corp., the largest U.S. utility owner, agreed Thursday to acquire Westcoast Energy Inc. for about $3.5 billion to add natural gas pipelines in the U.S. and Canada.

Shareholders of Vancouver, Canada-based Westcoast would get about $27.90 a share in cash and stock, 15% more than the stock’s closing price Thursday. Duke also would assume about $5 billion in debt, executives of the companies said after the close of markets.

The deal marks the first major North American business acquisition announced since last week’s terrorist attacks, and demonstrates continuing U.S. interest in Canadian natural gas and oil companies.

Devon Energy Corp. of Oklahoma City agreed this month to pay $4.6 billion for Canada’s Anderson Exploration Ltd. Conoco Inc., the No. 5 U.S. oil company, bought Gulf Canada Resources Ltd. in July for about $6.3 billion in cash and assumed debt.

“We see a tremendous need to expand natural gas infrastructure across North America to move incremental supply,” Duke Chairman and Chief Executive Richard Priory said.

Natural gas prices rose as high as $10 per million British thermal units late last year, and though prices recently have dropped below $2.15 in U.S. futures trading, analysts expect demand for the relatively clean-burning fuel to rise sharply in the next decade as new power plants are built.

The Westcoast deal, if approved by U.S. and Canadian regulators, is expected to add 5 cents to per-share earnings in the first year after it is completed and 11 cents by the third, Duke Chief Financial Officer Robert Brace said. The Charlotte-based company earned $2.10 a share last year.

Westcoast Chief Executive Michael Phelps said he expects his shareholders to vote on the sale by mid-December.

The companies’ natural gas assets, when combined, would include 18,900 miles of transmission pipes, 241 billion cubic feet of storage, 58,700 miles of gathering pipeline, 84 processing facilities and 16,500 miles of distribution pipes.

Merrill Lynch & Co. is Duke’s financial advisor. Credit Suisse First Boston and CIBC World Markets Inc. are advising Westcoast.

Duke shares rose 84 cents to close at $38.73 and Westcoast’s U.S. shares rose 20 cents to $24.30, both on the New York Stock Exchange, before the deal was announced.

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Bloomberg News and Reuters were used in compiling this report.