Energy Transfer (NYSE:ET) has agreed to acquire Enable Midstream Partners (NYSE:ENBL) in an all-equity transaction valued at $7.2 billion. The deal will enhance the master limited partnership's (MLP) midstream infrastructure footprint throughout the mid-continent and Gulf Coast regions. And it will be credit accretive for Energy Transfer and should generate at least $100 million in annual cost savings.

Energy Transfer is offering 0.8595 of its units for each unit of Enable Midstream, implying an at-the-market transaction with no deal premium. Enable's largest investors, utilitiesOGE Energy (NYSE:OGE) and CenterPoint Energy (NYSE:CNP), have agreed to support the merger. They own a combined 79.2% of the MLP's outstanding units and control its general partner, which Energy Transfer will acquire as part of the deal. The company expects the transaction to close sometime around midyear.

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Enable Midstream will bolster Energy Transfer's footprint in several regions, providing increased connectivity for its natural gas and natural gas liquids transportation businesses. The combined company will strengthen its leadership position in the mid-continent region, where it will own the most processing capacity and have the largest pipeline system. It will also become the leading processing and treating company in the Ark-La-Tex Basin.

The addition of Enable Midstream will boost Energy Transfer's annual adjusted EBITDA by nearly $1 billion. That will help reduce the combined company's debt-to-EBITDA ratio, enhancing Energy Transfer's credit profile. The combined company should generate significant free cash flow after paying its distribution in 2021 and over the next three years.

Energy Transfer has been searching for a credit-positive transaction, which it seems to have found in Enable Midstream. Add that to the incremental cash flow from the cost savings, and this transaction should improve the long-term sustainability of the company's high-yielding distribution.

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