Please ensure Javascript is enabled for purposes of website accessibility

Energy Transfer to Acquire Enable Midstream for $7.2 Billion

By Matthew DiLallo - Updated Feb 17, 2021 at 9:49AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The all-equity deal will enhance the midstream giant's credit profile and reduce costs.

Energy Transfer (ET 0.69%) has agreed to acquire Enable Midstream Partners (ENBL) in an all-equity transaction valued at $7.2 billion. The deal will enhance the master limited partnership's (MLP) midstream infrastructure footprint throughout the mid-continent and Gulf Coast regions. And it will be credit accretive for Energy Transfer and should generate at least $100 million in annual cost savings. 

Energy Transfer is offering 0.8595 of its units for each unit of Enable Midstream, implying an at-the-market transaction with no deal premium. Enable's largest investors, utilities OGE Energy (OGE 1.15%) and CenterPoint Energy (CNP 1.38%), have agreed to support the merger. They own a combined 79.2% of the MLP's outstanding units and control its general partner, which Energy Transfer will acquire as part of the deal. The company expects the transaction to close sometime around midyear.  

Two people shaking hands with pipelines in the background.

Image source: Getty Images.

Enable Midstream will bolster Energy Transfer's footprint in several regions, providing increased connectivity for its natural gas and natural gas liquids transportation businesses. The combined company will strengthen its leadership position in the mid-continent region, where it will own the most processing capacity and have the largest pipeline system. It will also become the leading processing and treating company in the Ark-La-Tex Basin.

The addition of Enable Midstream will boost Energy Transfer's annual adjusted EBITDA by nearly $1 billion. That will help reduce the combined company's debt-to-EBITDA ratio, enhancing Energy Transfer's credit profile. The combined company should generate significant free cash flow after paying its distribution in 2021 and over the next three years.

Energy Transfer has been searching for a credit-positive transaction, which it seems to have found in Enable Midstream. Add that to the incremental cash flow from the cost savings, and this transaction should improve the long-term sustainability of the company's high-yielding distribution.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Energy Transfer LP Stock Quote
Energy Transfer LP
$11.65 (0.69%) $0.08
OGE Energy Corp. Stock Quote
OGE Energy Corp.
$41.48 (1.15%) $0.47
CenterPoint Energy, Inc. Stock Quote
CenterPoint Energy, Inc.
$32.42 (1.38%) $0.44
Enable Midstream Partners, LP Stock Quote
Enable Midstream Partners, LP

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.