Enbridge to acquire 100% of Spectra Energy Partners in $3.3bn all-stock deal

Canadian natural gas distribution company Enbridge has agreed to acquire 100% of its Houston-based master limited partnership (MLP) Spectra Energy Partners (SEP), by buying out 17% of stake which it previously didn’t own in the latter in an all stock-deal worth $3.3 billion.

Spectra Energy Partners is among the largest MLPs in the US which owns stakes across pipeline and storage facilities that link growing supply areas to markets where there is high-demand for natural gas and crude oil. Its assets include over 15,000 miles of pipelines, 170 billion cubic feet of natural gas storage and nearly 5.6 million barrels of crude oil storage.

Under the terms of the Enbridge acquisition of Spectra Energy Partners, the former will buy all of the 81.9 million shares of the US MLP it previously didn’t own at a fixed exchange ratio of 1.111 common shares of Enbridge for each share of SEP.

Enbridge to take full ownership of Spectra Energy Partners in $3.3bn all-stock deal. Photo courtesy of ENBRIDGE INC.

Enbridge, stating on its acquisition of Spectra Energy Partners, said: “Significant weakening of the US Master Limited Partnership (MLP) capital markets has adversely affected the growth opportunities for MLPs, including SEP. 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 stand-alone 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.”

Enbridge’s 100% acquisition of Spectra Energy Partners is expected to provide shareholders of the latter a superior investment proposition in the common shares of the Canadian natural gas distribution company.

It gives the Spectra Energy Partners shareholders direct ownership in one of the major energy infrastructure companies in North America made up of premium liquids transportation, natural gas transmission and natural gas distribution utility franchises.

Enbridge’s full acquisition of Spectra Energy Partners is also expected to cut down the risks associated with prolonged uncertainty and unfavorable changes that could be potentially applied to MLPs as a result of the revised Federal Energy Regulatory Commission (FERC) tax policies.

Closing of Enbridge’s 100% acquisition of Spectra Energy Partners, which will be subject to customary closing conditions, is likely to be wrapped up in the fourth quarter of this year.