Enbridge Inc T.ENB

The Good Bad and The Ugly

[Experienced]

This deal by ENB can be looked at from many perspectives....

The Good

ENB has bought solid gas utilities that are well managed and in politically friendly juristictions (ie Republican).  

The assets were bought at the lower end of typical valuations and at a P/E ratio lower than what ENB currently trades at.  So if all goes well, the acquisition should be accretive and enhance the prospect of further dividend increases over the long run

The deal reduces the dependence on its liquids business and offers potential for synergies related to dispatchable energy using natural gas which is a good thing.

The Bad

ENB has issued $4+ billion in shares which are entitled to receive dividends before the deal is consumated which by the company's own estimate could take a year.  This may stress the ability of the company to raise dividends over the next year.

The issuing of the shares now represents a strong bet the deal will go through.

The Ugly

Most of the debt assumed is variable rate in a current relatively speaking high interest rate environment (ie much higher than rates we have seen over the past number of years).  If interest rates stay high over the next year or (gawd forbid) go higher then this will present challenges to the math associated with the deal.  How this is handled will depend in part on how the respective regulatory bodies score the interest cost as part of the their rate decisions.  But these things takes time.

The approval for the deal requires Federal as well as State approvals.  While the State approvals most likely will happen, there is some risk that in an election year and Biden and his Gang of zealots may put up roadblocks to an approval or could in an extreme case not approve the deal at all.  Such an event would leave ENB "holding the bag" since they have already issued the new equity for the deal.  Recall how this played out in the case of ALA purchase of Washington Gas and the delays for that approval.

So where does all this investors?

Basically in the "Dunno" category.  How one decides to play this depends a lot on one's investment objectives and tolerance to risk.  In my case, at this point in my life, "wait and see" will dominate.

[Experienced]

In my earlier post, following the deal with Dominion, my conclusion was to "wait and see". After watching the price action over the past month or so, it seems as though the denizens of The Street seem to be OK with the deal for now.  As I mentioned in my earlier post, a lot will depend on what interest are in a year from now when the deal will close baring some regulatory hiccup

[meritmat]

In Experience I trust)

[prabhatmalik]

Today it is ugly for no apparent reason, all other pipeltnes are up. Just cannot understand/

[corvette67]

I sold all mine in the fifties in Feb but i also started an underwait position today.Seems like a decent place to start. We shall see. GLTA