Energy Transfer Equity Buying Williams Cos. For $32.61B

28 Sep 2015 | Author: | No comments yet »

Energy Transfer Wins $37.7 Billion Williams Pipelines Bid.

The purchase is the second largest energy deal announced this year behind only Royal Dutch Shell’s roughly $70 billion acquisition of natural gas producer BG Group in April, and it’s the first major combination announced since oil prices slid from near $60 per barrel highs earlier this year.

Energy Transfer Equity LP won its bid to take over Williams Cos., agreeing to pay $37.7 billion for control of pipelines and plants that handle almost a third of rising U.S. natural gas demand. statement Monday. Dallas’ Energy Transfer operates on a larger scale, with about 71,000 miles of pipelines connecting wells and processing centers throughout Texas, the Gulf Coast and the Midwest.

WMB, -0.53% (“Williams”), the owner of Williams Partners’ general partner, whereby both parties have terminated their previously announced merger agreement under which Williams was to acquire all of the public outstanding common units of Williams Partners in an all stock-for-unit transaction. The deal ends a nine-month effort by Dallas billionaire Kelcy Warren that became public in June when Williams rejected Energy Transfer’s first offer as too low, and then sought other suitors for an auction of the company.

As contemplated by the merger agreement, the termination fee is being paid through an irrevocable waiver of a portion of the quarterly incentive distributions Williams is entitled to receive from Williams Partners (in an aggregate amount of $428 million, but in no circumstances in an amount of more than $209 million per quarter). Analysts expect that the artery would become even more valuable when linked to Energy Transfer’s existing network of Permian Basin and Eagle Ford Shale pipes. “Energy Transfer makes sense,” said Peggy Connerty, a midstream analyst at investment firm Morningstar. “We’ve always been positive on the deal.” Both Energy Transfer and The Williams Cos. are structured as tax-advantaged master limited partnerships, each with a publicly traded parent company that control one or more separate publicly traded partnerships. Williams and ETE today announced a business combination transaction valued at approximately $37.7 billion, including the assumption of debt and other liabilities. Its lines connect some Energy Transfer businesses. “Williams adds scale, complimentary assets that enhance services to producers, synergies and significant potential commercial growth opportunities,” Elvira Scotto, an analyst for RBC Capital Markets, wrote in a June 22 note to clients. Williams Partners is an industry-leading, large-cap natural gas infrastructure master limited partnership with a strong growth outlook and major positions in key U.S. supply basins and also in Canada.

However, the Williams board didn’t close the door to a deal completely and invited further bidding when it hired investment bankers to determine the best path forward. The pool was further limited by regulatory concerns — many onlookers said that a deal with eligible Houston-based suitor Kinder Morgan could be complicated by overlapping infrastructure.

Although the partnership believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Additional information about issues that could lead to material changes in performance is contained in the partnership’s annual reports filed with the Securities and Exchange Commission.

Energy Transfer controls three other partnerships: pipeline owner Energy Transfer Partners LP, fuel distributor and retailer Sunoco LP, and Sunoco Logistics Partners LP, an owner of pipelines carrying crude oil and refined products.

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