Enbridge to Buy Units for $7.1 Billion to Simplify Structure

Enbridge to Buy Units for $7.1 Billion to Simplify Structure
Enbridge agreed to acquire the shares it doesn't already own in three North American units for about $7.1 billion.

(Bloomberg) -- Enbridge Inc. agreed to acquire the shares it doesn’t already own in three North American units for about $7.1 billion as the Canadian pipeline giant moves to simplify its corporate structure.

The rollup of the so-called master limited partnerships will bring all of Enbridge’s core liquids and natural gas assets under the umbrella of a single publicly traded entity to the benefit of all shareholders and unitholders, Calgary-based said in a statement Tuesday.

The move is part of a broader trend in the industry. Peers from Williams Cos. to Loews Corp. have ditched MLPs used to hold many oil and gas pipelines after a March U.S. tax change sent shares -- called units -- plummeting, making it more difficult to raise money for new projects.

Companies wanted their MLP “to be able to go out on its own two feet and raise money and build things,” said MUFG Securities Americas Inc. analyst Barrett Blaschke. “When that’s not working, you see these simplification trends.”

Regulators in July made major concessions on the initial tax policy change. While that didn’t stop Enbridge from moving forward with plans to scrap its MLPs, the company last month sweetened its offer to buy Spectra Energy Partners LP after the original proposal failed to include a premium for the partnership’s unitholders.

By rolling up its sponsored vehicles, Enbridge can significantly reduce the complexity of both the organizational structure and the company’s financial reporting, David Galison, an analyst at Canaccord Genuity, said in a note to clients.

“Investors want and deserve aligned incentives and good governance,” said Ethan Bellamy, an analyst at Robert W. Baird & Co. “These simplification deals help get us there.”

Details of the deals:

Enbridge said it will buy all remaining outstanding shares of Enbridge Income Fund Holdings Inc., which includes renewable-generation assets and the largest oil pipeline crossing into the U.S. from Canada, for C$4.7 billion ($3.6 billion). In a separate statement, Enbridge said it will take ownership of master limited partnerships Enbridge Energy Partners LP and Enbridge Energy Management LLC, valuing the stakes at about $3.5 billion. Enbridge fell 1 percent to C$44.25 at 11:32 a.m. in Toronto.

To contact the reporters on this story: Rachel Adams-Heard in Houston at radamsheard@bloomberg.net; Naureen S. Malik in New York at nmalik28@bloomberg.net; Kevin Orland in Calgary at korland@bloomberg.net. To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net Carlos Caminada, Christine Buurma.


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