In what’s 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 for auction on both TSX and the NYSE, will raise gross proceeds of $2 billion in the transaction, which is likely to close on March 1.
Initially, Enbridge plans to use the proceeds to pay down short-term indebtedness pending investment in capital projects. Long term the equity raised with the offering “is likely to be sufficient to fulfill equity funding requirements for Enbridge’s consolidated commercially secured growth program with the end of 2017,” Enbridge said in a statement, released after markets closed Wednesday.
At $40.70 the about-to-be-issued shares are now being priced at a 5.7 percent discount to Wednesday’s closing cost of $43.16. While Enbridge ended the up 39 cents, trading in the shares was very volatile, using 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. 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. Back then it planned to gather $400 million in the sale of 7.86 million shares priced at $40.90 a share. Because of strong demand the offering wound up at $460 million.
Enbridge’s current deal will finish 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 a choice to market an additional 7.371 million shares at $40.70. If that option is exercised then Enbridge find yourself by having 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 five times the 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
