EnLink Midstream, LLC To Acquire Enlink Midstream Partners

Written By: Jen Neville
October 23, 2018

Enlink Midstream energy provider

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The EnLink Midstream companies, EnLink Midstream, LLC and EnLink Midstream Partners, LP, recently announced that they had entered into a merger agreement whereby ENLC would acquire all outstanding common units of ENLK not already owned by ENLC in a unit-for-unit exchange transaction. The transaction expects to close in the first quarter of 2019, and upon closing, EnLink will continue to operate as ENLC, a leading midstream energy provider with diversified service offerings across key supply basins and demand regions in the United States.

Under the terms of the merger agreement, ENLK common unitholders will be entitled to receive 1.15 common units of PF ENLC for each common unit of ENLK owned. In connection with the transaction, ENLC's incentive distribution rights in ENLK will be eliminated. The transaction was approved by the Conflicts Committees and Boards of Directors of both ENLC and ENLK.

Expected Transaction Benefits:

– Creates a $13 billion enterprise value company upon closing.
– Simplifies the organizational structure into a single, larger publicly traded midstream energy company, increasing the public float and enhancing trading liquidity.
– Improves project returns with a lower cost of capital for the pro forma entity. [read more]
– Delivers immediate accretion to distributable cash flow per unit for both ENLC and ENLK unitholders. Distributable cash flow is a non-GAAP measure.
– Expected to provide low double-digit, DCF-per-unit growth through 2021.
– Reflects EnLink's ongoing commitment to investment-grade-style credit metrics.
– All three credit rating agencies are expected to reaffirm current ratings.
– Drives significant improvement in distribution coverage to 1.3x to 1.5x through 2021, and results in excess of $700 million of cumulative retained cash flow over the same period, supporting EnLink's plans to self-fund the equity portion of a majority of growth capital expenditures.
-Results in sustainable distribution growth of 5 percent or greater annually for at least three years.

"EnLink has been on a journey to evolve for long-term success. We took another right step in our journey through the announcement of our simplification transaction, which will be immediately accretive to both ENLC and ENLK common unitholders," stated Michael J. Garberding, EnLink President and CEO. "Our business model goes unchanged, and we continue to execute on our 7 growth strategies. Through this transaction, we will now have a streamlined structure that further strengthens our ability to achieve greater returns on the capital we deploy, allowing us to create lasting value for all our stakeholders."

Simplification Transaction Details
Under the terms of the agreement, ENLC will acquire 100 percent of the outstanding ENLK common units that it does not already own. ENLK common unitholders will be entitled to receive 1.15 units of PF ENLC per ENLK unit owned. The consideration for ENLK common unitholders represents a premium of 3.5 percent based on the volume weighted average price for both securities over the last 30 trading days. As part of the simplification, PF ENLC will eliminate all IDRs in ENLK. EnLink's Series B Preferred Units, Series C Preferred Units, and senior notes will continue to remain outstanding at ENLK. PF ENLC will have approximately 490 million fully diluted units outstanding at transaction close.

The transaction results in a tax basis step-up for PF ENLC with respect to the assets of ENLK. The step-up in tax basis will enhance PF ENLC's tax outlook and is expected to result in minimal income taxes through at least 2023. The transaction is expected to be taxable to ENLK common unitholders.

Concurrent with the execution of the merger agreement, an affiliate of GIP that owns a majority of outstanding ENLC common units executed a written consent to approve such issuance. This consent satisfied the requisite approval of the ENLC unitholders for the issuance by ENLC of common units in the transaction. The transaction is subject to the approval of holders of a majority of the ENLK common units. As part of the transaction, GIP, ENLC, and certain subsidiaries of ENLC entered into a support agreement agreeing to vote in favor of the transaction. The transaction is expected to close in the first quarter of 2019, subject to obtaining the ENLK unitholder approval, customary regulatory approvals, and other customary closing conditions. [/read]

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