Enbridge set to raise $2 billion of equity

In what is one of the largest equity financing deals in recent years, Calgary- based Enbridge Inc. has signed a bought deal with a group of underwriters to sell 49.14 million shares at $40.70 apiece. Enbridge, whose shares are listed on both the TSX and the NYSE, will raise gross proceeds of $ 2 billion from the transaction, which is expected to close on March 1.

Initially, Enbridge plans to use the proceeds to pay down short- term indebtedness pending investment in capital projects. Longer t erm, t he equity raised through the offering “is expected to be sufficient to ful- fill equity funding requirements for Enbridge’s consolidated commercially secured growth program through the end of 2017,” Enbridge said in a statement, released after markets closed Wednesday.

At $ 40.70 the about- tobe- issued shares are being priced at a 5.7- per- cent discount to Wednesday’s closing price of $ 43.16. While Enbridge ended up 39 cents, trading in the shares was very volatile, with the price ranging from an intraday low of $ 41.01 to a high of $ 43.25. Over the past 12 months, the shares have traded as high as $66.14.

The deal, at $ 2 billion, is the sixth largest by a Canadian issuer since 2012. The five larger deals were the US$3-billion offering by Barrick Corp; the $ 2.6- billion secondary offering by Bank of Nova Scotia of the bulk of its stake in CI Financial; the $ 2.6- billion secondary offering by PrairieSky Royalty, where the proceeds went to Encana; the $ 2.18- billion instalment receipt offering by Em era Inc .; and the $ 2.03- billion equity financing by Element Financial. Since 2012, there have been six other equity financings of more than $1.5 billion.

Enbridge last raised common equity in mid- 2014. Back then it planned to gather $400 million from the sale of 7.86 million shares priced at $40.90 a share. Because of strong demand, the offering ended up at $460 million.

Enbridge’s current deal could end up larger than $ 2 billion. The underwriters — RBC Capital Markets, Credit Suisse, BMO Capital Markets, CIBC World Markets, Scotiabank and TD Securities as co- leads — have been given an option to sell an additional 7.371 million shares at $ 40.70. If that option is exercised, then Enbridge will end up with an additional $ 300 million in gross proceeds.

On its 2014 equity financing, RBC and Credit Suisse were given the key leadership roles. This time round, with five times the amount being raised, Enbridge opted for a larger syndicate.

For those involved — and assuming that the underwriters have no problem in rounding up buyers — the financing will be very rewarding: the dealers will receive 3.5 per cent of the gross proceeds.

Enbridge could not be reached for comment.