New York: Enbridge Inc said it will buy Houston-based Spectra Energy Corp in a $28 billion (Dh102.8 billion) cross-border deal that will create the largest energy pipeline and storage company in North America.

Spectra shareholders will get $40.33 per share in the all-stock agreement, representing a premium of about 12 per cent to the September 2 closing price, according to a company statement Tuesday. The deal, which would be the biggest foreign purchase ever by a Canadian company, is expected to close in the first quarter of 2017, pending regulatory approval.

The move by Calgary-based Enbridge comes amid a wave of consolidation in the pipelines business as opposition to new lines prompts companies to seek growth through acquisitions. Energy Transfer Equity LP terminated an agreement to buy Williams Cos amid a stubborn two-year energy rout, while Kinder Morgan Inc has moved to simplify its structure.

“Enbridge is making its move into the north-east natural gas infrastructure after its Canadian counterpart TransCanada bought Columbia Pipeline Group earlier this year,” Rob Thummel, managing director and portfolio manager at Tortoise Capital Advisors LLC, said in an email on Tuesday. TransCanada Corp agreed in March to buy Columbia Pipeline Group for $10.2 billion.

Spectra’s investors will receive 0.984 shares of the combined company for each share of Spectra common stock they own. Shareholders of the Canadian acquirer will own about 57 per cent of the combined company, which will be called Enbridge Inc. Over the next 12 months, Enbridge said it expects to divest about $2 billion of non-core assets.

A 15 per cent annualised dividend increase is expected in 2017, the companies said. Cost savings from the merger could reach C$540 million ($418 million; Dh1.53 billion), they said. Spectra rose 8.6 per cent from its September 2 close to $39.26 at 8.34am in New York. Enbridge fell 1.4 per cent to $40.40.

“Over the last two years, we’ve been focused on identifying opportunities that would extend and diversify our asset base and sources of growth beyond 2019,” said Al Monaco, president and chief executive officer of Enbridge Inc, in a statement. “We are accomplishing that goal by combining with the premier natural gas infrastructure company to create a true North American and global energy infrastructure leader.”

Greg Ebel, Spectra’s president and chief executive officer, said the “strength of the combined company will support a large capital program to fund the continued development of Spectra Energy’s existing, pre-eminent project inventory.”

Credit Suisse Securities and RBC Capital Markets acted as financial advisers to Enbridge while Sullivan & Cromwell LLP and McCarthy Tetrault LP provided legal advice.

BMO Capital Markets and Citi acted as financial advisers for Spectra while Wachtell, Lipton Rosen & Katz and Goodmans LLP provided legal advice.