Enbridge shares (ENB.TO)(ENB) fell on Wednesday as investors digested the Canadian pipeline operator’s plan to buy three U.S. natural gas utilities in a deal worth US$14 billion.

Enbridge announced its vision to create North America’s largest natural gas utility platform shortly after the close of trading on Tuesday, sending New York-listed shares about seven per cent lower in the after-hours session.

Toronto-listed shares fell 5.50 per cent to $45.51 as at 11:10 a.m. ET on Wednesday.

Enbridge says the deal would double the size of its gas utility business through the acquisition of the East Ohio Gas, Questar Gas, and Public Service of North Carolina from Virginia-based Dominion Energy. Under the terms, Enbridge would pay US$9.4 billion in cash, and take on US$4.6 billion in debt.

The company plans to fund the transaction through a combination of debt and equity. On Tuesday, it announced a major bought deal to raise $4 billion through the sale of 89,490,000 common shares to underwriters led by RBC Capital Markets and Morgan Stanley at a price of $44.70 per unit.

“When you issue equity, there is always going to be a little chop in the market,” Enbridge chief executive officer Greg Ebel said during a virtual press conference on Wednesday.

“What we’re telling investors, and what I expect will play out here, is investors are really going to like the returns that we’re able to generate in this business.”

However, Tudor, Pickering, Holt & Co. analyst Colton Bean says the bought deal came at a “steep cost,” in a note to clients on Wednesday.

“The concurrent announcement of a $4 billion bought deal offering largely derisks financing, though at a steep cost, with the equity offering coming at a seven per cent discount to prior close,” he wrote.

Enbridge says it expects the acquisition, which requires U.S. state and federal approval, to close next year. The company projects the new assets will be cash-flow accretive in the first year of ownership.

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“We have a transaction that represents a rare and unprecedented opportunity to acquire high-quality growing natural gas utilities at scale and at a historically attractive valuation,” Ebel said on a conference call Tuesday evening. “A gas asset package of this size has not hit the market in at least a decade.”

Ebel added that acquiring the trio of utilities from Dominion shifts the company’s earnings mix closer to 50-50 crude oil and liquids, versus natural gas and renewable energy, from about a 60-40 ratio today.

“This transaction helps us to achieve greater balance and gives us more exposure to natural gas, which is and will continue to be a critical fuel to help us realize our lower-carbon emissions,” he said.

Bean is maintaining a $54 per share price target on Toronto-listed Enbridge shares, framing Tuesday’s announcements as a “slight positive.”

“While the deal screens well strategically, and allows Enbridge to materially grow its utility base at a reasonable valuation, we expect some near-term weakness as the market contends with the additional equity, and potential rebalancing of investors who are inclined to look elsewhere for utility exposure,” he wrote.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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