Enbridge Inc. and Spectra Energy Partners LP (SEP) have entered into a definitive agreement under which Enbridge will acquire all outstanding public common units of SEP at a ratio of 1.111 common shares of Enbridge for each common unit of SEP. The ratio is a 9.8% increase to the exchange ratio offered by Enbridge on May 17. The transaction is valued at $3.3 billion.
The companies explained that a significant weakening of US master limited partnership (MLP) capital markets had adversely affected SEP’s growth opportunities. If SEP were to continue as a stand-alone entity it would need to transition to a self-funding model using internally generated cash flow, limiting future distribution growth.
The merger will give Enbridge all 81.9 million public outstanding common units of SEP. In aggregate, based on the agreed exchange ratio, Enbridge would issue an estimated 91 million Enbridge common shares in connection with the transaction, or about 5% of the total number of Enbridge common shares outstanding.
The companies expect the transaction to close fourth-quarter 2018, subject to customary conditions. Enbridge Inc. and Spectra Corp. merged late 2016 (OGJ Online, Sept. 6, 2016).