Energy Transfer LP (NYSE: ET) is buying fellow High Yield Energy List member Enable Midstream Partners (NYSE: ENBL) in an all-stock deal valued at $7.2 billion, including assumed debt. The purchase includes the general partner interest held jointly by Centerpoint Energy (NYSE: CNP) and OG&E Energy (NYSE: OGE), both companies’ combined nearly 80 percent limited partner interest and the remaining publicly traded shares.
Shares of both Centerpoint and OG&E finished higher the day of the announcement. A cash offer would likely have been preferable for most of their investors. But swapping their near total control of Enable for shares of much larger Energy Transfer LP will make it possible to at last monetize their investment. And both companies are now also far more likely to become takeover targets in their own rights.
In contrast, shares of Enable dropped sharply and Energy Transfer’s were slightly lower. Under the terms of the deal, Enable shareholders will get 0.8595 ET units per ENBL unit. As it’s a merger between MLPs, there should be no taxable event. And with Energy Transfer shares still near their lows for the cycle, we see considerable upside that a cash offer would not provide.
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Elliott and Roger on Feb. 25, 2021
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