Enbridge offers $13.6B to combine spinoffs into one big company

Less than a month after saying it wouldn’t increase its offer to buy the equity it doesn’t own in three North American subsidiaries, Calgary-based Enbridge Inc. is doing just that.

The pipeline, utility and power company announced Tuesday it would increase the offers it made last May for Enbridge Income Fund Holdings Inc. by 11.3 per cent and for two related subsidiaries, Enbridge Energy Partners, L.P. and Enbridge Energy Management, L.L.C., by 8.7 per cent and 16 per cent, respectively.

The changes, which now include a cash component in addition to Enbridge shares for Enbridge Income Fund shares, take the estimated total value of the deals announced Tuesday to about $9.3 billion.

When combined with the $4.3 billion offered in a sweetened deal for Spectra Energy Partners LP units in late August, the total value of bringing its four sponsored subsidiaries in-house will be about $13.6 billion, up from the $11.4 billion announced in May.

“Upon closing of these buy-in transactions, the roll-up of these sponsored vehicles will streamline Enbridge’s corporate and capital structures and brings all of the core liquids and gas pipeline assets under the umbrella of a single publicly traded entity to the benefit of all shareholders and unitholders,” Enbridge Inc. said in a news release.

Under the deal, Enbridge Income Fund shareholders will receive 0.735 of an Enbridge share and 45 cents in cash for each share they hold. They will also be entitled to receive the Enbridge fourth-quarter dividend. Enbridge Energy Partners unitholders and Enbridge Energy Management shareholders are to receive 0.335 shares of Enbridge for each unit or share.

Enbridge launched an initiative last May to buy back all of its pipeline subsidiaries in the U.S., citing a U.S. Federal Energy Regulatory Commission move in March to end certain tax loopholes they enjoyed.

American pipeline rivals The Williams Cos. and Cheniere Energy Inc. launched similar multibillion-dollar offers for their subsidiaries at the same time for the same reason.

In 2016, a U.S. Appeals Court ruled that energy regulators were allowing master limited partnerships to benefit from a “double recovery” of taxes. MLPs are taxexempt corporate structures that pay their profits to investors in dividend-style distributions.