Pipeline and refinery

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What happened

Shares of Enbridge Energy Partners (NYSE:EEP) closed down 17.6% on Friday after the company announced that it would acquire its subsidiary Midcoast Energy Partners (NYSE: MEP). Shares of Midcoast are down 5.1% on the announcement as well.

So what

For some time now, Enbridge Energy Partners' management has been talking about a strategic review of Midcoast. As oil and gas activity in the U.S. started to decline, Midcoast's business was hit particularly hard. There was a point where Enbridge Energy Partners was giving cash to Midcoast in order to pay its distributions to public shareholders.

So we should have expected something to happen with Midcoast, but I don't think many investors were expecting this particular plan of action. According to Enbridge Energy Partners' management, the deal will simplify the corporate structure and give it better access to capital. Those words ring a little hollow, though, because Midcoast had gone public back in 2013 with the very idea of generating greater access to capital to grow its U.S.-based natural gas gathering and processing assets.

Now what

According to management, this may not be the last corporate change as part of the corporate review. It's also a little discouraging to see these moves being made before the completion of the Enbridge and Spectra Energy merger, which is expected to wrap up in the coming months. Perhaps this is the better move in the long term for Midcoast since it was clearly floundering as a stand-alone business. Today, though, this seems to suggest that Enbridge Energy Partners' management is a little out of its league in handling the vast components of the business.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.