On Thursday, shares of Columbia Pipeline Group Inc. (NYSE: CPGX) jumped up 16.96% to $23.10 after TransCanada Corporation (USA) (NYSE: TRP), the company behind the controversial Keystone XL oil pipeline project, announced that they are in talks to buy Columbia Pipeline Group.
“While we are in discussions regarding a potential transaction with a third party, no agreement has been reached and there is no assurance that these discussions will continue or that any transaction will be agreed upon,” TransCanada Corporation stated.
With a typical takeover premium and including Columbia Pipeline Group’s debt load of approximately $3 billion, this acquisition could be worth well over $10 billion. Shares of TransCanada Corporation down 4.72% to $35.36 during Thursday trading.
TransCanada had revenue of $8.47 billion last year, up about 11%, and a net loss of more than $0.75 billion. The company currently has a market value of around $26 billion.
Columbia Pipeline Group owns about 15,000 miles of gas pipelines from New York to the Gulf of Mexico, together with one of the country’s biggest underground storage systems and related gathering and processing assets. Most of the company’s assets covering the Marcellus and Utica shale formations beneath Pennsylvania, West Virginia and Ohio. Columbia Pipeline Group had net income of $307.1 million in 2015 which increased approximately 15%. Revenue down slightly to $1.33 billion.
During the company’s quarterly earnings conference call last month, TransCanada management was asked by analysts about the company’s acquisition strategy. “I think it is very clear that there has been a shakeout in terms of valuations of companies,” said by TransCanada Chief Operating Officer Alexander Pourbaix, “We do think we’re in a pretty good opportunity phase right here."