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Energy infrastructure company AltaGas Ltd said it would jointly build a natural gas processing plant and a natural gas liquids separation train with a privately held producer in the Montney shale play in western Canada.

iStockphoto / Getty Images

AltaGas Ltd. is buying WGL Holdings Inc. for about $4.5-billion (U.S.) in the latest major acquisition of a U.S. energy infrastructure company by a Canadian rival.

Calgary-based AltaGas said on Wednesday it is offering $88.25 cash per WGL share, representing a 11.8 per cent premium over its closing price on Tuesday. The company had acknowledged earlier this month it was in discussions about a deal and WGL had been discussed as a potential acquisition target since November.

The offer is more than double the value of AltaGas's current market capitalization. AltaGas will also assume about $2.4-billion (Canadian) in debt.

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WGL owns Washington Gas Light Co., a gas utility in Washington D.C., as well as a gas gathering and processing business in the prolific Marcellus region of the U.S. Northeast and an energy marketing unit.

The friendly deal follows a series of major acquisitions that involve energy infrastructure - the so-called midstream segment of the business - by Canadian companies looking for both expansion opportunities and stable earnings. Last year, TransCanada Corp. acquired Columbia Gas in a $10.2-billion (U.S.) transaction and Enbridge Inc. struck a $37-billion (Canadian) deal to buy Spectra Energy Corp.

AltaGas said its and WGL's businesses are similar in scope, adding the deal will offer geographic diversity as well as an immediate boost to earnings and cash flow. Over the first five years, earnings per share are expected to increase by up to 10 per cent annually.

"Both companies are strong utility operators, have a sweet spot of pipeline and midstream investments in premier supply basins, and have power generation businesses weighted to clean energy and innovations," AltaGas Chief Executive Officer David Harris said in a statement.

AltaGas said it will have $7-billion worth of projects to proceed with in all its operating regions, it said.

It is no stranger to U.S. operations, running gas utilities in Michigan and Alaska. It also has franchises in Alberta, British Columbia, Nova Scotia and the Northwest Territories.

AltaGas says it has a fully committed $4.95-billion (U.S.) bridge financing facility in place. It also plans to issue equity in a $400-million private placement with the Ontario Municipal Employees Retirement System and a $2.1-billion issue of subscription receipts.

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The companies said they expect the deal to close in the second quarter of 2018.

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