Last year’s nosedive in the Canadian dollar made it very probable that American investors would pile funds north of the border in search of assets and acquisitions at low prices. But the actual activity seen, especially in the energy sector, is entirely opposite to what analysts forecast, as Canadian companies look to the U.S. for expansion.
Good examples would be pipeline heavyweights Enbridge and TransCanada who are happy to pay over 25 percent premiums compared to three years ago acquiring American firms with deals totalling nearly $60 billion just in the last six months.
Earlier in the year, Canadian power firms Emera and Fortis invested $20 billion purchasing utility companies to the south.
Anthony Russell, Senior Vice President at Monex BMO Securities says the reasons for the current trend are convoluted but a big factor may be the difficulties Canadian companies are having getting building done in their own territory.
“Over the last few years regulatory complications have made it harder for Canadian firms to get their building work cleared. Even though the loonie [Canadian dollar] is so low, they are still seeking expansion in the U.S. market, obviously it’s worth paying the premiums and bad exchange rate for.”
Meanwhile, in Canadian M&A’s, last week saw the biggest ever merger in the country’s energy sector when U.S. company Spectra Energy, a gas pipeline specialist, announced they were selling the company to Calgary –based energy delivery firm Enbridge for almost $40 billion.
Enbridge were attracted by Spectra’s oil units as well as their already impressive gas facilities, and the agreement will help diversify Enbridge’s portfolio. Many energy firms are looking to move more into the gas business as North America starts to take a step back from coal-fired electricity generation methods.
It’s a welcome move for Enbridge, who have had serious issues with their Northern Gateway project over the last few years as regulators have held up building work.
