Enbridge Income Fund Good Deal or Bad Deal?

Enbridge (ENB) has announced this morning it will acquire all the outstanding shares of Enbridge Income Fund (ENF). The deal will see each common share of ENF exchanged for 0.735 of a common share of ENB and $0.45 cash. With ENB trading this morning at 34.10, this deal is worth $25.5135 for each ENF share.

In addition, ENF shareholders will be entitled to ENB’s fourth quarter dividend and ENF’s monthly dividends through to closing of this deal. If the deal closes as expected before the record date for Enbridge’s fourth quarter dividend, expected to be November 15, 2018, to be paid in early December, an ENF shareholder will receive, as an ENB shareholder, the ENB December Dividend and the ENF dividend to be paid in November to ENF shareholders of record on October 31, 2018. In the event the Arrangement closes after the record date for the ENB December Dividend, the Cash Component will be increased for the ENB December Dividend based upon the Agreed Exchange Ratio less any dividends paid by ENF to its shareholders after November 30, 2018.

This deal is part of a broader industry trend for pipeline companies to buyout their master limited partnership units after tax changes and as the investment vehicles become less popular. Enbridge has previously announced the buyout of Spectra Energy Partners.

Is this a good deal for ENF shareholders?  Probably not. But tax rules are changing and it has become less tax advantageous for pipeline companies to list MLPs or income trusts, so the parent companies are buying back their listed pipeline MLPs.

Enbridge Announces Definitive Agreement to Acquire All Public Equity of Enbridge Income Fund Holdings Inc., Achieves Significant Milestones Toward Corporate Structure Simplification

CALGARY, Sep. 18, 2018 (Canada NewsWire via COMTEX) — Enbridge Inc. (ENB) (Enbridge) and Enbridge Income Fund Holdings Inc. (ENF) (ENF) today announced that they have entered into a definitive arrangement agreement (the Agreement) under which Enbridge will acquire all of the issued and outstanding public common shares of ENF (the Arrangement), subject to the approval of ENF shareholders.