May 17, 2018, by Amanda Jordan
Two of North America’s biggest pipeline companies announced plans to repurchase subsidiaries as the industry seeks to curb future tax obligations in the face of a federal overhaul.
Williams Cos. is buying the remaining stake in Williams Partners in a $10.5 billion all-stock deal, it said Thursday. Enbridge Inc. earlier said it made all-share proposals to the boards of its units to acquire all outstanding securities.
The deals allow the companies to absorb partnership businesses that have come under government scrutiny. Pipeline stocks plunged in March after regulators said so-called master limited partnerships can no longer charge customers for taxes the companies don’t pay. Thursday’s announcements follow a similar move by Kinder Morgan Inc. in 2014.
Williams will acquire the outstanding stock of Williams Partners at a ratio of 1.494 of its shares for each unit of the subsidiary, according to a statement. The transaction represents a 6.4 percent premium to public unit holders, based on Wednesday’s close. It extends the period in which Williams isn’t expected to be a cash taxpayer through 2024 and will immediately add to cash available for dividends, it said.
Enbridge’s plan affects units Spectra Energy Partners LP, Enbridge Energy Partners LP, Enbridge Energy Management LLC and Enbridge Income Fund Holdings Inc., according to a separate statement. The proposed exchange ratios reflect a value for all the publicly held securities of C$11.4 billion ($8.9 billion), or 272 million Enbridge shares, if completed on the terms offered.
Enbridge expects the deals to be “approximately neutral” to its three-year financial guidance and positive to its post-2020 outlook due to tax and other synergies.