CALGARY and HOUSTON, TX, Aug. 24,
2018 /PRNewswire/ - Enbridge Inc. (TSX: ENB) (NYSE: ENB)
(Enbridge) on behalf of itself and certain of its wholly owned US
subsidiaries and Spectra Energy Partners, LP (NYSE:SEP) (SEP) today
announced that they have entered into a definitive agreement
("Agreement") under which Enbridge will acquire all of the
outstanding public common units of SEP on the basis of 1.111 common
shares of Enbridge for each common unit of SEP ("Agreed Exchange
Ratio"). The Agreed Exchange Ratio represents a 9.8% increase to
the exchange ratio offered by Enbridge on May 17, 2018 of 1.0123 Enbridge common shares per
SEP common unit. The transaction is valued at US $3.3 billion / CAN $4.3
billion based on the closing price of Enbridge's common
shares on the New York Stock Exchange (NYSE) / Toronto Stock
Exchange (TSX) on August 23,
2018.
Benefits and Considerations for SEP Unitholders
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.
This transaction offers SEP public unitholders a superior
investment proposition in Enbridge common shares, including:
- Direct ownership in the largest energy infrastructure company
in North America comprised of
premium liquids transportation, natural gas transmission and
natural gas distribution utility franchises that generate diverse,
safe and reliable cash flows
- A secured growth profile which underpins expected 10% annual
dividend growth through 2020 with substantially enhanced dividend
coverage
- A more effective cost of capital to finance growth
- A stronger balance sheet and superior credit profile
- Reduction in risks related to continued uncertainty and
potential unfavorable changes applied to MLPs related to the
revised Federal Energy Regulatory Commission (FERC) tax
policies
- Increased opportunity for further meaningful capital
appreciation as Enbridge advances its strategic priorities
- Enhanced trading liquidity
The transaction also provides SEP unitholders an attractive
value reflecting, among other factors, the July 18, 2018 FERC Order on Rehearing, which
clarified its revised policy on the treatment of income taxes for
MLPs. The clarification could potentially improve SEP's position
relative to its cost of service assets given the magnitude of SEP's
historical deferred income tax balances, and is therefore uniquely
positive for SEP among the Enbridge family of sponsored
vehicles.
The transaction premium is attractive particularly in light of
SEP's limited future capacity for distribution growth. Also, for
SEP unitholders, the value received removes uncertainty overhang
created by the FERC policy announcements.
Benefits and Considerations for Enbridge Shareholders
The buy-in of SEP is strategically and economically attractive
to current and future Enbridge shareholders and provides
substantial benefits, including:
- Significant advancement of Enbridge's strategy to simplify and
streamline its corporate structure which further increases the
transparency of its strong cash generating assets
- An expected neutral impact on Enbridge's three-year financial
guidance through 2020 and positive benefits to Enbridge's
post-2020 outlook primarily due to tax and other financial
synergies
- Increasing ownership in its core businesses and further
enhancing its industry-leading, low-risk profile
- An improved Enbridge credit profile due to the elimination of
SEP public distributions, higher retention of cash to support
self-funded growth and opportunities to minimize the
structural subordination of Enbridge debt
- Reduction in risks related to uncertainty and potential
unfavorable changes associated with regulatory tax policies applied
to MLPs and potential incremental Enbridge support required
by SEP in difficult capital markets
- No change to consolidated EBITDA following completion of the
merger since the assets held by SEP are already managed and
operated by Enbridge's U.S. subsidiaries and consolidated for
accounting purposes by Enbridge
Other Information
As a result of the merger, Enbridge would acquire all of the
81.9 million public outstanding common units of SEP at a fixed
exchange ratio of 1.111 common shares of Enbridge for each common
unit of SEP. In aggregate, based on the Agreed Exchange Ratio,
Enbridge would issue an estimated 91.0 million Enbridge common
shares in connection with the transaction, representing
approximately 5 percent of the total number of Enbridge common
shares outstanding.
A more detailed description of the Agreement will be set forth
in Enbridge's Current Report on Form 8-K that it expects to file
with the Securities and Exchange Commission (the SEC) on
August 24, 2018.
The transaction has been approved by the board of directors of
Enbridge and certain of its wholly owned US subsidiaries. The board
of directors of the general partner of SEP (SEP Board) delegated to
a conflicts committee consisting solely of independent directors
(SEP Conflicts Committee) the authority to review, evaluate and
negotiate the transaction on behalf of SEP. The SEP Conflicts
Committee unanimously approved the transaction and recommended
approval of the transaction to the SEP Board. The transaction has
been approved by the SEP Board based on that recommendation.
Pursuant to the Agreement, Enbridge has irrevocably and
unconditionally agreed to deliver its consent, with respect to all
of the SEP common units owned by its wholly-owned subsidiaries, in
favor of approval of the transaction. As the majority SEP
unitholder (83% of total SEP common units outstanding), Enbridge's
approval by consent will constitute the requisite SEP unitholder
vote required to approve the transaction.
Closing of the transaction is expected to occur in the fourth
quarter of 2018 and will be subject to customary closing
conditions. If the transaction does not close before the record
date for SEP's distribution to be paid in the fourth quarter of
2018, and subject to SEP Board approval, SEP is expected to pay a
cash distribution to its unitholders in the fourth quarter
consistent with previously disclosed distribution guidance. Based
on an expected fourth quarter closing date for the transaction, a
SEP unitholder will receive either a SEP cash distribution or an
Enbridge cash dividend.
After being filed, SEP unitholders will be able to obtain a copy
of the consent solicitation statement/prospectus related to the
transaction, as well as other filings containing information about
the proposed transaction, without charge, at the SEC's internet
site (http://www.sec.gov).
BofA Merrill Lynch and Scotiabank are acting as financial
advisors to Enbridge. McCarthy Tetrault LLP, Sullivan &
Cromwell LLP and Vinson & Elkins LLP are acting as Canadian,
U.S. legal and tax advisors, respectively, to Enbridge.
Jefferies LLC acted as financial advisor to the SEP Conflicts
Committee, while Sidley Austin LLP acted as legal advisor to the
SEP Conflicts Committee.
FORWARD-LOOKING INFORMATION
This communication includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Forward‑looking
statements are based on Enbridge's and SEP's respective beliefs and
assumptions. These forward-looking statements are identified by
terms and phrases such as: anticipate, believe, intend, estimate,
expect, continue, should, could, may, plan, project, predict, will,
potential, forecast and similar expressions and include, but are
not limited to, statements regarding the expected closing,
consummation, completion, timing and benefits of the proposed
merger of SEP and Autumn Acquisition Sub, LLC, a Delaware limited liability company and a
wholly‑owned subsidiary of Enbridge (the "Proposed Merger"), the
expected synergies and shareholder value to result from the
combined company, the expected levels of cash distributions by SEP
with respect to its common units, the expected levels of dividends
by Enbridge to its shareholders, the expected financial results of
Enbridge, SEP and their affiliates, future credit ratings,
financial condition and business strategy of Enbridge, SEP and
their affiliates.
Although SEP and Enbridge believe these forward-looking
statements are reasonable based on the information available on the
date such statements are made and processes used to prepare the
information, such statements are not guarantees of future
performance and readers are cautioned against placing undue
reliance on forward-looking statements. By their nature, these
statements involve a variety of assumptions, known and unknown
risks and uncertainties and other factors, which may cause actual
results, levels of activity and achievements to differ materially
from those expressed or implied by such statements. Material
assumptions include assumptions about the following: the expected
supply of and demand for crude oil, natural gas, natural gas
liquids ("NGL") and renewable energy; prices of crude oil, natural
gas, NGL and renewable energy; exchange rates; inflation; interest
rates; availability and price of labor and construction materials;
operational reliability; customer and regulatory approvals;
maintenance of support and regulatory approvals for projects;
anticipated in-service dates; weather; the timing and closing of
dispositions; the realization of anticipated benefits and synergies
of the Proposed Merger; governmental legislation; acquisitions and
the timing thereof; the success of integration plans; impact of
capital project execution on future cash flows; credit ratings;
capital project funding; expected earnings; expected future cash
flows; and estimated future dividends. Assumptions regarding the
expected supply of and demand for crude oil, natural gas, NGL and
renewable energy, and the prices of these commodities, are material
to and underlie all forward-looking statements, as they may impact
current and future levels of demand for SEP's and Enbridge's
services. Similarly, exchange rates, inflation and interest rates
impact the economies and business environments and may impact
levels of demand for SEP's and Enbridge's services and cost of
inputs, and are therefore inherent in all forward‑looking
statements. Due to the interdependencies and correlation of these
macroeconomic factors, the impact of any one assumption on a
forward-looking statement cannot be determined with certainty,
particularly with respect to the impact of the Proposed Merger,
expected earnings and cash flow or estimated future dividends. The
most relevant assumptions associated with forward-looking
statements on announced projects and projects under construction,
including estimated completion dates and expected capital
expenditures, include the following: the availability and price of
labor and construction materials; the effects of inflation and
foreign exchange rates on labor and material costs; the effects of
interest rates on borrowing costs; the impact of weather and
customer, government and regulatory approvals on construction and
in-service schedules and cost recovery regimes.
Forward‑looking statements involve risks and uncertainties that
may cause actual results to be materially different from the
results predicted. Factors that could cause actual results to
differ materially from those indicated in any forward‑looking
statement include, but are not limited to: the risk that the
Proposed Merger does not occur; negative effects from the pendency
of the Proposed Merger; the ability to realize expected cost
savings and benefits; the timing to consummate the Proposed Merger;
whether SEP will produce sufficient cash flows to provide the level
of cash distributions SEP expects with respect to its common units;
whether Enbridge will produce sufficient cash flows to provide the
level of dividends Enbridge expects with respect to its common
shares; outcomes of litigation and regulatory investigations,
proceedings or inquiries; operating performance of SEP and
Enbridge; regulatory parameters regarding SEP and Enbridge; other
Enbridge dispositions; the proposed simplification of Enbridge's
corporate structure; project approval and support; renewals of
rights of way; weather, economic and competitive conditions; public
opinion; changes in tax laws and tax rates; changes in trade
agreements, exchange rates, interest rates, commodity prices,
political decisions and supply of and demand for commodities; and
any other risks and uncertainties discussed herein or in Enbridge's
and SEP's other filings with Canadian and United States securities regulators. Except to
the extent required by applicable law, Enbridge and SEP assume no
obligation to publicly update or revise any forward‑looking
statements made in this news release or otherwise, whether as a
result of new information, future events or otherwise. All
subsequent forward-looking statements, whether written or oral,
attributable to Enbridge, SEP or persons acting on their behalf,
are expressly qualified in their entirety by these cautionary
statements. These factors, as well as additional factors that could
affect Enbridge's or SEP's respective forward‑looking statements,
are described under the headings "Risk Factors" and "Cautionary
Statement Regarding Forward‑Looking Information" in Enbridge's 2017
Form 10‑K, filed with the U.S. Securities and Exchange Commission
("SEC") and Canadian securities regulators on February 16, 2018, SEP's 2017 Form 10‑K, filed
with the SEC on February 16, 2018,
and in Enbridge's and SEP's respective other filings made with the
SEC and Canadian securities regulators, which are available via the
SEC's website at www.sec.gov and at www.sedar.com, as applicable.
In light of these risks, uncertainties and assumptions, the events
described in the forward-looking statements might not occur or
might occur to a different extent or at a different time than
Enbridge or SEP has described. All forward-looking statements in
this release are made as of the date hereof and neither Enbridge
nor SEP undertakes any obligation to publicly update or revise any
forward-looking statements in this release, whether as a result of
new information, future events or otherwise.
IMPORTANT NOTICE TO INVESTORS
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any consent or approval. The proposed merger between Enbridge and
SEP will be submitted to the unitholders of SEP for their
consideration. Enbridge will file with the SEC a consent
solicitation statement of SEP that also constitutes a prospectus of
Enbridge. Enbridge and SEP also plan to file other documents with
the SEC regarding the proposed merger. INVESTORS AND SECURITY
HOLDERS OF ENBRIDGE AND SEP ARE URGED TO READ THE CONSENT
SOLICITATION STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS THAT
WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN
THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE MERGER. Investors and unitholders will be
able to obtain free copies of the consent solicitation
statement/prospectus and other documents containing important
information about Enbridge and SEP once such documents are filed
with the SEC, through the website maintained by the SEC at
http://www.sec.gov. Copies of the consent solicitation
statement/prospectus and the filings with the SEC that will be
incorporated by reference in the consent solicitation
statement/prospectus can also be obtained, without charge, by
directing a request either to Enbridge Inc., 200, 425 – 1st Street
S.W., Calgary, Alberta, Canada T2P
3L8, Attention: Investor Relations or to Spectra Energy Partners,
LP, 5400 Westheimer Court, Houston,
Texas 77056, Attention: Investor Relations.
Participants in the Solicitation
Enbridge, and certain of its directors and executive officers,
SEP, and certain of the directors and executive officers of GP,
LLC, which manages the business and affairs of SEP, may be deemed
participants in the solicitation of consent from the holders of SEP
Common Units in connection with the Merger. Information about the
directors and executive officers of Enbridge is set forth in its
definitive proxy statement filed with the SEC on April 5, 2018. Information about the directors
and executive officers of GP, LLC is set forth in SEP's Annual
Report on Form 10-K for the fiscal year ended December 31, 2017, which was filed with the SEC
on February 16, 2018. These documents
can be obtained free of charge from the sources indicated above.
Other information regarding the participants in the consent
solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the consent solicitation statement/prospectus and other relevant
materials to be filed with the SEC when they become available.
About Enbridge Inc.
Enbridge Inc. (the Company) is North America's premier energy infrastructure
company with strategic business platforms that include an extensive
network of crude oil, liquids and natural gas pipelines, regulated
natural gas distribution utilities and renewable power generation.
The Company safely delivers an average of 2.9 million barrels of
crude oil each day through its Mainline and Express Pipeline;
accounts for approximately 65% of U.S.-bound Canadian crude oil
exports; and moves approximately 20% of all natural gas consumed in
the U.S., serving key supply basins and demand markets. The
Company's regulated utilities serve approximately 3.7 million
retail customers in Ontario,
Quebec, and New Brunswick. Enbridge also has interests in
more than 2,500 MW of net renewable generating capacity in
North America and Europe. The Company has ranked on the Global
100 Most Sustainable Corporations index for the past nine years;
its common shares trade on the Toronto and New
York stock exchanges under the symbol ENB.
Life takes energy and Enbridge exists to fuel people's
quality of life. For more information, visit
www.enbridge.com.
About Spectra Energy Partners
Spectra Energy Partners, LP is one of the largest pipeline
master limited partnerships in the United
States and connects growing supply areas to high-demand
markets for natural gas and crude oil. These assets include
approximately 16,000 miles of transmission pipelines, approximately
170 billion cubic feet of natural gas storage, and approximately
5.6 million barrels of crude oil storage. Spectra Energy Partners,
LP is traded on the New York Stock Exchange under the symbol SEP;
information about the company is available on its website at
www.spectraenergypartners.com.
FOR FURTHER INFORMATION PLEASE CONTACT:
Media:
Michael
Barnes
Toll Free: (888)
992-0997
Email: media@enbridge.com
Investment Community:
Enbridge
Inc.
Jonathan
Gould
Toll Free: (800)
481-2804
Email: investor.relations@enbridge.com
Spectra Energy Partners,
LP
Roni Cappadonna
Toll Free: (800) 481-2804
Email: investor.relations@enbridge.com
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SOURCE Enbridge Inc.
