Credit Suisse: Don't Buy Columbia Pipleline Stock On TransCanada Deal

Credit Suisse’s John Edwards maintained an Underperform rating for Columbia Pipeline Group Inc CPGX, while raising the price target from $25 to $25.50. The rating for Columbia Pipeline Partners LP CPPL has been upgraded to Outperform, with the price target being raised from $22 to $23.

The Deal Has Been Struck

On March 17, TransCanada Corporation (USA) TRP announced its plan to acquire Columbia Pipeline Group for $25.50 per unit, putting the implied acquisition value at $13B including the latter’s outstanding debt.

Columbia Pipeline Partners would continue trading and TransCanada would assume the GP interests in the MLP from Columbia Pipeline Group. “We believe that CPGX's acquisition will result in greater funding optionality with respect to the $7B of Columbia Group commercially secured growth projects,” analyst John Edwards wrote.

Edwards added that the Underperform rating is justified since the implied 8 percent premium of the deal to Columbia Pipeline Group’s current price is “below the median total return of our coverage universe.”