Enbridge Sells Noverco Stake for $1.14B; Street Says Buy


Energy infrastructure company Enbridge Inc. (ENB), through a subsidiary, has agreed to offload its 38.9% stake in Noverco Inc to Trencap for a cash consideration of $1.14 billion, net of Noverco’s non-recourse debt that Trencap will assume.

The transaction is expected to close by early 2022 and represents a 29x multiple to Noverco’s GAAP earnings of $39 million in 2020. Enbridge plans to use the funds to pare down short-term debt and thus the stake sale is not expected to significantly affect the company’s distributable cash flow per share.

Enbridge CFO Colin Gruending said, “We are pleased to opportunistically monetize this non-strategic financial investment in Noverco at an attractive valuation and surface this value for our shareholders.”

Gruending added, “This transaction further enhances our already sector-leading financial strength and flexibility and demonstrates our disciplined approach to capital allocation.” (See Enbridge stock analysis on TipRanks)

On May 25, Argus Research analyst Bill Selesky reiterated a Buy rating on the stock and increased the price target to $43 (8.8% upside potential) from $40.

Selesky highlighted Enbridge’s better than estimated performance in Q1 despite the tough energy and economic environment. The analyst is positive that Enbridge can maintain its 7.1% dividend yield and a target payout ratio of 65%.

Based on 8 Buys and 1 Hold, consensus among analysts is a Strong Buy. The Enbridge average analyst price target of $45.17 implies 14.3% upside potential.

Shares have gained about 23.6% so far this year.

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