Enbridge Inc., through its web of subsidiaries, is livening up the deal market.Fred Lum/The Globe and Mail
Enbridge Inc., through its web of subsidiaries, is livening up the deal market.
Midcoast Energy Partners L.P. – a subsidiary of Enbridge Energy Partners L.P., which is a subsidiary of pipeline powerhouse Enbridge – is planning an initial public offering of up to $575-million (U.S.) in units, according to documents filed with the Securities and Exchange Commission Friday.
Enbridge Energy recently formed Midcoast Energy to serve as its "primary vehicle for owning and operating" its natural gas and natural gas liquids midstream business – think pipelines and processing plants – in the United States. Midcoast Energy plans to use the IPO proceeds to pay down debt, fund working capital demands, and send cash up to its parent, according to its regulatory filing.
Enbridge Energy will "retain a significant interest" in Midcoast Energy through its ownership of the pair's general partner and other means, according to the SEC filing.
Bank of America Merrill Lynch is serving as the deal's book-running manager and structuring agent, according to a statement released Friday. If other banks are getting a slice of the action, they were not named in Midcoast's press release.
There's been a dearth of business for investment bankers this year, although a smattering of deals has recently hit the Canadian market. Midcoast Energy is aiming for the New York Stock Exchange, and the offering is expected in the second half of this year. Neither the number of units distributed nor their price has been determined.
Midcoast Energy's initial asset consists of a 39 per cent controlling interesting in Midcoast Operating. Its facilities are located primarily in Texas and Oklahoma, and Enbridge Energy – the outfit putting Midcoast Energy on the block – retains a 61 per cent non-controlling interest in Midcoast Operating.
This means the IPO could further spur activity in the market. Enbridge Energy "will be incentivized" to sell some of its stake in Midcoast Operating, according to the IPO filing. But that comes with a caveat: Enbridge Energy doesn't have to sell and Midcoast Energy doesn't have to buy.