American energy companies Energy Transfer (ET) and Enable Midstream Partners announced on Wednesday that they have entered into a definitive merger agreement wherein ET will buy Enable in an all-stock deal valued at ~$7.2bn. As per the agreement, Enable’s common equity shareholders will receive 0.8595 common shares of ET for every share in Enable. Further, Enable’s Series A preferreds will be exchanged for 0.0265 Series G preferreds of ET. The transaction also includes a $10mn cash payment to Enable’s general partner. The transaction, if completed, will be immediately accretive to free cash flow post-distributions, have a positive impact on credit metrics and add significant fee-based cash flows from fixed-fee contracts. It will add to ET’s footprint across multiple regions and offer better connectivity for ET’s natural gas and NG: transportation businesses. ET said that it expects the combined entity to generate over $100mn of annual run-rate cost and efficiency synergies, excluding potential financial synergies. Citi and RBC Capital Markets acted as financial advisors to ET while Goldman Sachs acted as financial advisor to Enable.

ET’s 5.15% bonds due 2045 and its 6.75% perps jumped 1.7 and 1.6 points to 104.92 and 95.25 respectively while Enable’s 4.4% 2027s and 5% 2044s jumped 5.3 and 3 points to 109.67 and 99.42 respectively.

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