En­bridge set to raise $2 bil­lion of equity

National Post (Latest Edition) - - FINANCIAL POST - Barry Critch­ley

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.

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