Enbridge announces definitive agreement to acquire all public equity of Spectra Energy Partners

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Logos of Enbridge Inc. and Spectra Energy Partners.

Enbridge Inc. and Spectra Energy Partners have entered into a definitive agreement to acquire the public equity of SEP. — Photo courtesy Enbridge/Spectra Energy

Enbridge Inc. (TSX: ENB) (NYSE: ENB) (Enbridge) on behalf of itself and certain of its wholly owned US subsidiaries and Spectra Energy Partners, LP (NYSE:SEP) (SEP) announced that they have entered into a definitive agreement ("Agreement") under which Enbridge will acquire all of the outstanding public common units of SEP on the basis of 1.111 common shares of Enbridge for each common unit of SEP ("Agreed Exchange Ratio"). The Agreed Exchange Ratio represents a 9.8% increase to the exchange ratio offered by Enbridge on May 17, 2018 of 1.0123 Enbridge common shares per SEP common unit. The transaction is valued at US $3.3 billion / CAN $4.3 billion based on the closing price of Enbridge's common shares on the New York Stock Exchange (NYSE) / Toronto Stock Exchange (TSX) on August 23, 2018.

Significant weakening of the US Master Limited Partnership (MLP) capital markets has adversely affected the growth opportunities for MLPs, including SEP. MLPs are dependent on consistent access to the capital markets at a reasonable cost of capital to grow their distributions. If SEP were to continue as a stand-alone entity in such an environment, it would be required to transition to a self-funding model using internally generated cash flow. SEP's priority would be to strengthen its balance sheet thereby limiting future distribution growth.

This transaction offers SEP public unitholders a superior investment proposition in Enbridge common shares, including:

Direct ownership in the largest energy infrastructure company in North America comprised of premium liquids transportation, natural gas transmission and natural gas distribution utility franchises that generate diverse, safe and reliable cash flows
A secured growth profile which underpins expected 10% annual dividend growth through 2020 with substantially enhanced dividend coverage
A more effective cost of capital to finance growth
A stronger balance sheet and superior credit profile
Reduction in risks related to continued uncertainty and potential unfavorable changes applied to MLPs related to the revised Federal Energy Regulatory Commission (FERC) tax policies
Increased opportunity for further meaningful capital appreciation as Enbridge advances its strategic priorities
Enhanced trading liquidity

The transaction also provides SEP unitholders an attractive value reflecting, among other factors, the July 18, 2018 FERC Order on Rehearing, which clarified its revised policy on the treatment of income taxes for MLPs. The clarification could potentially improve SEP's position relative to its cost of service assets given the magnitude of SEP's historical deferred income tax balances, and is therefore uniquely positive for SEP among the Enbridge family of sponsored vehicles.

The transaction premium is attractive particularly in light of SEP's limited future capacity for distribution growth. Also, for SEP unitholders, the value received removes uncertainty overhang created by the FERC policy announcements.

The buy-in of SEP is strategically and economically attractive to current and future Enbridge shareholders and provides substantial benefits, including:

Significant advancement of Enbridge's strategy to simplify and streamline its corporate structure which further increases the transparency of its strong cash generating assets
An expected neutral impact on Enbridge's three-year financial guidance through 2020 and positive benefits to Enbridge's post-2020 outlook primarily due to tax and other financial synergies
Increasing ownership in its core businesses and further enhancing its industry-leading, low-risk profile
An improved Enbridge credit profile due to the elimination of SEP public distributions, higher retention of cash to support self-funded growth and opportunities to minimize the structural subordination of Enbridge debt
Reduction in risks related to uncertainty and potential unfavorable changes associated with regulatory tax policies applied to MLPs and potential incremental Enbridge support required by SEP in difficult capital markets
No change to consolidated EBITDA following completion of the merger since the assets held by SEP are already managed and operated by Enbridge's U.S. subsidiaries and consolidated for accounting purposes by Enbridge

Enbridge Inc. (the Company) is North America's premier energy infrastructure company with strategic business platforms that include an extensive network of crude oil, liquids and natural gas pipelines, regulated natural gas distribution utilities and renewable power generation. The Company safely delivers an average of 2.9 million barrels of crude oil each day through its Mainline and Express Pipeline; accounts for approximately 65% of U.S.-bound Canadian crude oil exports; and moves approximately 20% of all natural gas consumed in the U.S., serving key supply basins and demand markets. The Company's regulated utilities serve approximately 3.7 million retail customers in Ontario, Quebec, and New Brunswick. Enbridge also has interests in more than 2,500 MW of net renewable generating capacity in North America and Europe. The Company has ranked on the Global 100 Most Sustainable Corporations index for the past nine years; its common shares trade on the Toronto and New York stock exchanges under the symbol ENB. Life takes energy and Enbridge exists to fuel people's quality of life. For more information, visit www.enbridge.com.

Spectra Energy Partners, LP is one of the largest pipeline master limited partnerships in the United States and connects growing supply areas to high-demand markets for natural gas and crude oil. These assets include approximately 16,000 miles of transmission pipelines, approximately 170 billion cubic feet of natural gas storage, and approximately 5.6 million barrels of crude oil storage. Spectra Energy Partners, LP is traded on the New York Stock Exchange under the symbol SEP; information about the company is available on its website at www.spectraenergypartners.com.