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Enbridge (ENB) Plans Equity Offering to Fund Major Acquisition

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Enbridge Inc. (ENB - Free Report) is setting the stage for a significant equity raise aimed at partially funding its ambitious $9.4-billion acquisition of three natural gas utilities from Dominion Energy (D - Free Report) .

The prominent Canadian pipeline operator has recently completed necessary filings in both Canadian and U.S. securities platforms, aiming to potentially raise up to C$2.75 billion (about $2.02 billion) by selling shares to the public.

The shares will be offered at ENB's discretion, allowing sales to the public intermittently at current market prices. The transactions could occur on major trading venues, such as the Toronto or New York stock exchanges, among other marketplaces in Canada and the United States. This method, known as an at-the-market offering, provides Enbridge with the flexibility to capitalize on favorable market conditions to raise funds.

The equity raising initiative is part of a broader financing strategy by Enbridge to manage the financial demands of its recent agreement to purchase Dominion’s gas-distribution assets. The deal, which was finalized last September, includes a $9.4-billion cash payment and the assumption of $4.6 billion in debt.

In its efforts to fund this acquisition, Enbridge previously conducted a C$4-billion bought-deal offering and secured debt financing commitments totaling $9.4 billion from notable financial institutions Morgan Stanley and Royal Bank of Canada. Enbridge has explored various other funding avenues, including the issuance of senior unsecured notes and junior subordinated hybrid debt.

Further bolstering its financial position, Enbridge completed a transaction in April, selling its stakes in two pipeline joint ventures to Pembina Pipeline. The deal was valued at C$3.1 billion, including debt.

With the acquisition process moving forward, Enbridge successfully closed the purchase of Dominion’s East Ohio Gas last month. ENB anticipates the completion of the acquisitions of Questar Gas and its related Wexpro companies, along with Public Service Co. of North Carolina, within the year. This strategic expansion underscores Enbridge's commitment to enhancing its portfolio and presence in the natural gas distribution sector.

Zacks Rank & Key Picks

Currently, Enbridge carries a Zack Rank #3 (Hold).

Investors interested in the energy sector may look at some better-ranked stocks like SM Energy Company (SM - Free Report) and Ecopetrol S.A. (EC - Free Report) . SM Energy and Ecopetrol sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SM Energy is an independent oil and gas company engaged in the exploration, exploitation, development, acquisition, and production of oil and gas in North America.

The Zacks Consensus Estimate for SM’s 2024 and 2025 EPS is pegged at $6.60 and $7.46, respectively. The stock has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.

Ecopetrol operates across various sections of the oil and gas industry, including the exploration, development, and production of oil and gas, refining, transportation, and the sale of petroleum products.

Ecopetrol has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days. The Zacks Consensus Estimate for EC’s 2024 and 2025 EPS is pegged at $2.55 and $2.63, respectively.

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Dominion Energy Inc. (D) - free report >>

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Ecopetrol S.A. (EC) - free report >>

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