Deciding the Deal of the Year

Weighing the factors to determine which transaction gets the nod is in no way a popularity contest

I’ll admit it. When it came time to making a final decision on Listed’s pick for the 2016 Deal of the Year, we knew it might draw some fire if the winner was a pipeline company and we splashed it all over our cover. But in the end, we went that route, selecting Enbridge Inc.’s (TSX:ENB) $37-billion deal for Houston-based Spectra Energy Corp. as the year’s top transaction (“Better a buyer than a builder be?” by Robert Thompson).

And many of our readers might be saying, why not? After all, pipeline companies are mainstream corporations, led by a lot of high-end executive and director talent, employing thousands of Canadians, a staple element in many pensions and RRSPs, and delivering to market the oil and gas that still drives much of our economy. All true.

But what’s also indisputable is that the products they’re supplying are doing damage to our climate and environment. We need cleaner, greener energy to supplant fossil fuels as quickly as possible, and the practice of laying new pipelines in sensitive environments, often against the will of the local landowners, communities and resident First Nations, is an approach to business that has less and less social legitimacy, even if it’s still fiduciarily defensible under law.

Nor does it take a newshound to realize that the tide is rising against pipelines and fossil fuels. As our Winter issue was going to press, the federal Liberal government announced its rejection of Enbridge’s application to build the Northern Gateway pipeline from Edmonton to Kitimat, B.C. At the same time, however, the Liberals also approved the Canadian leg of Enbridge’s plan to replace and expand its Line 3 pipeline from Alberta to Superior, Wisc., and gave a green light to Kinder Morgan’s planned expansion of its Trans Mountain pipeline from Alberta to Burnaby, B.C. The latter still faces enormous opposition, however, and few consider its construction a sure thing.

It’s precisely because of this tumultuous landscape that we selected Enbridge-Spectra as our Deal of the Year. Essentially, it boils down to a variation on an adage: if the window is closing on building new pipelines, buy some that already exist. Sheer size counts, of course, too—it’s the largest-ever foreign purchase by a Canadian company—but at its essence, the deal represents an artful step by Enbridge CEO Al Monaco to fulfill his duty to shareholders, employees and the communities they live in to grow the company, boost income and keep raising dividends as planned. Deal of the Year isn’t a popularity contest, either. Pipelines are making news, plain and simple, and that makes this transaction the biggest M&A story in 2016.

Also: Our Deal of the Year short list highlights three deals that came close to top honours but ultimately fell short.

—Brian Banks, editorial director

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