On Monday, Morgan Stanley lowered shares of EnLink Midstream, LLC (NYSE: ) from Overweight to Equalweight, setting a $16.00 price objective.
Adjustment follows the announcement ONE OK Inc. (NYSE:NYSE:) will acquire a controlling interest of Global Infrastructure Partners (GIP) in ENLC. The deal is expected to impact ENLC’s future value, aligning it more closely with Equalweight-rated stocks.
The transaction between OKE and GIP includes OKE buying all of GIP’s shares in ENLC, which includes 43% of ENLC’s outstanding common units at the rate of $14.90 per unit, and all interests in managing members for $300 million.
This agreement generated total cash of approximately $3.3 billion. The price per common unit represents a premium of 12.8% over ENLC’s closing price on August 27, 2024.
After this acquisition is completed, OKE plans to consolidate ENLC by acquiring the remaining common units, which comprise 57% of ENLC’s total common units. This next acquisition is intended as a second step, a tax-free transaction.
The initial acquisition of GIP interests by OKE was a significant step, as it not only changed the dynamics of control in ENLC but also set a new precedent for the share’s potential growth trajectory. The premium paid at the current market price shows a good view of ENLC’s value.
Investors and market watchers will now look forward to the next phase, where OKE aims to gain public interest in ENLC. The outcome of these strategic moves will be a key factor in ENLC’s stock performance in the near term.
In other recent news, EnLink Midstream is experiencing significant developments in its corporate structure. The company was downgraded from Buy to Hold by Stifel analysts after announcing an agreement with ONEOK, Inc. and Global Infrastructure Partners (GIP).
As part of the agreement, ONEOK is set to acquire a controlling interest in EnLink Midstream and all of GIP’s interest in Medallion Midstream. This transaction, expected to close by the end of 2024, marks the expansion of ONEOK’s midstream services.
Concurrently, EnLink Midstream completed an agreement for a public offering of $500 million in senior notes, secured by its subsidiary, EnLink Midstream Partners, LP. The proceeds of this offering are used for general corporate purposes, including debt repayment.
In terms of financial performance, EnLink Midstream reported a strong second quarter in 2024, with $306 million in adjusted EBITDA and a $50 million unit buyback.
In front of analysts, Wells Fargo adjusted its stance on shares of EnLink Midstream, moving the rating from Overweight to Equal Weight, with a price target of $15.00. This change comes with the expectation of a buyout offer for EnLink Midstream, projected to be around $14.90 per share in the first quarter of 2025. The company’s analysis indicates important future events that could impact shareholder value.
InvestingPro Insights
In light of Morgan Stanley’s recent re-rating of EnLink Midstream, LLC (NYSE: ENLC ), current and prospective investors can benefit from additional insights provided by InvestingPro. The company’s stock has been trading near its 52-week high, with the last price closing at $14.52, which is 98.11% of this peak. This matches the premium price of $14.90 per unit offered by ONEOK, Inc. (NYSE: OKE) for GIP’s controlling interest in ENLC.
InvestingPro data reveals that ENLC’s market capitalization is about $6.67 billion, and the stock is trading at a high earnings multiple with a P/E ratio of 44.83, adjusted to 38.72 for the last twelve months in Q2 2024. Despite the decrease in revenue -14.01% over the last twelve months, the company has paid dividends for 11 consecutive years, with a current dividend payout of 3.65% and a growth of 6.0% over the same period.
For investors considering ENLC shares, two InvestingPro Tips highlight important considerations: ENLC share price movements are quite stable, which can lead to short-term investment strategies, and the company’s short-term liabilities exceed liquid assets, which can lead to liquidity risk. . For those looking for a more in-depth analysis, InvestingPro offers additional tips on ENLC, accessible at https://www.investing.com/pro/ENLC.
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