Enbridge set to raise $2 billion of equity that will meet its needs until the end of 2017

In what is among the largest equity financing deals in recent years, Calgary-based Enbridge Inc. has signed a bought cope 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 also the NYSE, will raise gross proceeds of $2 billion from the transaction, that is likely to close on March 1.

Initially, Enbridge plans to use the proceeds to pay for down short-term indebtedness pending purchase of capital projects. Long term the equity raised through the offering “is expected to be sufficient to fulfill 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-to-be-issued shares are being priced at a 5.7 percent discount to Wednesday’s closing price of $43.16. While Enbridge ended the up 39 cents, trading in the shares was very volatile, with the price which range from an intraday low of $41.01 to a a lot of $43.25. Over the past Twelve months, the shares have traded as high as $66.14.

The deal, at $2 billion, is the sixth largest with a Canadian issuer since 2012. 5 larger deals were the US$3 billion offering by Barrick Corp; the $2.6 billion secondary offering by Bank of Quebec of the majority of its stake in CI Financial; the $2.6 billion secondary offering by PrairieSky Royalty, in which the proceeds went to Encana; the $2.18 billion installment receipt offering by Emera Inc.; and also the $2.03 billion equity financing by Element Financial. Since 2012, there have been six other equity financings in excess of $1.5 billion.

Enbridge last raised common equity in mid-2014. In those days it planned to collect $400 million in 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 will finish up bigger than $2 billion. The underwriters – RBC Capital Markets, Credit Suisse, BMO Capital Markets, CIBC World Markets, Scotiabank and TD Securities as co-leads – happen to be given a choice to market one more 7.371 million shares at $40.70. In the event that choice is exercised then Enbridge find yourself 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 around round, with 5 times the total amount being raised, Enbridge opted for a bigger syndicate.

For those involved – and assuming that the underwriters don’t have any condition in rounding up buyers – the financing can be really rewarding: the dealers will received 3.5 percent of the gross proceeds.

Enbridge couldn’t be reached for comment.

Financial Post

bcritchley@nationalpost.com