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TransCanada’s $3.2-billion equity offering sells out

TransCanada, the company behind Keystone XL, is using its equity sale to help fund the acquisition of Columbia Pipeline Group Inc.

Nati Harnik/AP

TransCanada Corp.'s $3.2-billion equity offering sold out quickly on Wednesday, adding to record proceeds the company raised in a well-received bought deal earlier this year.

Calgary-based TransCanada announced the latest offering after markets closed on Wednesday, one of a series of moves aimed at funding a multibillion-dollar acquisition and shoring up future dividend growth.

Sources with the lead underwriters said Thursday the offering was completely taken up. It pushes total proceeds garnered by TransCanada from stock sales this year to nearly $8-billion, assuming the overallotment option is exercised in the latest offering.

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The bought deal was led by Toronto-Dominion Bank, Bank of Montreal and Royal Bank of Canada.

It follows a massive equity sale in March that saw the pipeline and power company raise $4.4-billion, a Canadian record.

TransCanada is selling shares and assets to help fund its $10.2-billion (U.S.) acquisition of U.S.-based Columbia Pipeline Group Inc. as it seeks growth opportunities outside of its home base in Western Canada.

To help fund the deal, the company initially said it would sell a portion of its Mexican natural gas business.

On Wednesday, it abandoned that plan, opting to raise equity instead.

The company also said it would sell power-generation assets in the U.S. Northeast for $3.7-billion.

Proceeds from that sale and the share issue will help pay down a bridge loan it took on when it purchased Columbia.

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TransCanada shares fell nearly 5 per cent in Thursday's session on the Toronto Stock Exchange, suggesting some investors were displeased with the dilution.

The company announced the deal for Columbia last July, giving it exposure to the fast-growing Marcellus shale gas zone in the U.S. Northeast.

The acquisition brings its portfolio of near-term growth projects to $25-billion (Canadian) at a time new pipelines face heightened scrutiny from environmentalists and regulators.

TransCanada also agreed to buy all the units of Columbia Pipeline Partners LP for $17 (U.S.) each for a total of $915-million – an amount about 8 per cent higher than TransCanada initially offered in September.

That deal is expected to close in the first quarter of 2017 and will boost TransCanada's stake in the assets to 100 per cent from 91.6 per cent.

The company said it expects annual dividend growth at the upper end of its previously stated range of 8 per cent to 10 per cent through 2020.

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With files from Tim Kiladze and Jeffrey Jones

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About the Author

Jeff Lewis is a reporter specializing in energy coverage for The Globe and Mail’s Report on Business, based in Calgary. Previously, he was a reporter with the Financial Post, writing news and features about Canada’s oil industry. His work has taken him to Norway and the Canadian Arctic. More

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