On Monday, Morgan Stanley downgraded EnLink Midstream, LLC (NYSE:ENLC) stock from Overweight to Equalweight, setting a price target of $16.00.
The adjustment follows the announcement that ONEOK , Inc. (NYSE:NYSE:OKE) will acquire Global Infrastructure Partners' (GIP) controlling interest in ENLC. The deal is expected to influence ENLC's future value, aligning it more closely with stocks rated Equalweight.
The transaction between OKE and GIP involves OKE purchasing GIP's entire stake in ENLC, which includes 43% of ENLC's outstanding common units at a rate of $14.90 per unit, and the entirety of the interests in the managing member for $300 million.
This agreement results in a total cash consideration 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.
Following the completion of this acquisition, OKE plans to further consolidate its hold on ENLC by acquiring the remaining publicly held common units, which account for 57% of ENLC's total common units. This subsequent acquisition is intended to be a second-step, tax-free transaction.
The initial acquisition of GIP's interests by OKE is a significant move, as it not only changes the control dynamics within ENLC but also sets a new precedent for the stock's potential growth trajectory. The premium paid on the current market price indicates a favorable view of ENLC's value.
Investors and market watchers will now be anticipating the next phase, where OKE aims to acquire the public interest in ENLC. The outcome of these strategic moves will likely be a key factor in ENLC's stock performance in the near term.
In other recent news, EnLink Midstream experienced significant developments in its corporate structure. The company was downgraded from Buy to Hold by a Stifel analyst following the announcement of 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 in late 2024, marks a significant expansion of ONEOK's midstream services.
Simultaneously, EnLink Midstream finalized an agreement for a public offering of $500 million in senior notes, guaranteed by its subsidiary, EnLink Midstream Partners, LP. The proceeds from this offering are intended for general corporate purposes, including debt repayment.
In terms of financial performance, EnLink Midstream reported a robust second quarter in 2024, with $306 million in adjusted EBITDA and a repurchase of $50 million of its units.
On the analysts' front, Wells Fargo adjusted its stance on EnLink Midstream stock, moving its rating from Overweight to Equal Weight, with a price target set at $15.00. This change comes with expectations of a buyout offer for EnLink Midstream, projected to be around $14.90 per share by the first quarter of 2025. The firm's analysis points to a significant event in the near future 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 may benefit from additional insights provided by InvestingPro. The company's stock has been trading near its 52-week high, with a recent price close at $14.52, which is 98.11% of this peak. This aligns with 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 stands at approximately $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 as of Q2 2024. Despite a decrease in revenue growth of -14.01% over the last twelve months, the company has maintained dividend payments for 11 consecutive years, with a current dividend yield of 3.65% and a 6.0% dividend growth in the same period.
For investors considering ENLC's stock, two InvestingPro Tips highlight important considerations: the stock price movements of ENLC are quite volatile, which could impact short-term investment strategies, and the company's short-term obligations exceed its liquid assets, which could pose a liquidity risk. For those seeking a deeper analysis, InvestingPro offers additional tips on ENLC, accessible at https://www.investing.com/pro/ENLC.
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