Canadian natural gas distribution and transportation company Enbridge has signed a $3.3bn deal to acquire all of the outstanding public common units of Spectra Energy Partners (SEP).
Pursuant to the terms of the agreement, Enbridge is offering 1.111 common shares for each common unit of SEP.
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This represents a 9.8% increase on Enbridge’s previous offer of 1.0123 common shares per SEP common unit, which was made in May.
Enbridge also made a proposal to acquire all of the outstanding equity securities of other sponsored vehicles, including Enbridge Energy Partners, Enbridge Energy Management and Enbridge Income Fund.
Already owning an 83% stake in SEP, Enbridge cited significant weakening of the US Master Limited Partnership (MLP) capital markets as the reason for the proposed acquisition.
The transaction comes after the US Federal Energy Regulatory Commission (FERC) eliminated tax benefits offered to MLPs.
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By GlobalDataThe company noted that the reversal in the policy has adversely affected the growth opportunities for SEP.
In a statement, Enbridge said: “MLPs are dependent on consistent access to the capital markets at a reasonable cost of capital to grow their distributions.
“If SEP were to continue as a standalone entity in such an environment, it would be required to transition to a self-funding model using internally generated cash flow.
“SEP’s priority would be to strengthen its balance sheet, thereby limiting future distribution growth.”
The acquisition presents an opportunity for Enbridge to simplify and streamline its corporate structure.
The company aims to leverage the transaction to receive benefits for its post-2020 outlook primarily due to tax and other financial synergies.
Subject to certain closing conditions, the transaction is slated for completion in the fourth quarter of this year.
Enbridge completed the $28bn merger with SEP in February last year to create the largest energy infrastructure company in North America with an enterprise value of $127bn.
