Energy Transfer Wins $37.7 Bid for Williams’ Gas Pipelines

28 Sep 2015 | Author: | No comments yet »

Energy Transfer and Williams Cos. to Merge in $32.6 Billion Deal.

Under the deal, Williams holders would receive roughly $43.50 per share held, or 1.8716 shares of ETE affiliate Energy Transfer Corp. per Williams share held. 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. If all of Williams’ stockholders elect to receive all cash or all stock, then each share of Williams common stock would receive $8 a share in cash and 1.5274 ETC common shares. 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. Energy Transfer, a Dallas-based pipeline company, had been pursuing Williams for six months before Williams spurned its unsolicited offer, valued at $48 billion or $53.1 billion including debt and other liabilities, in June. 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 Partners advises its unitholders to reference news issued today by Williams regarding its agreement to be acquired by Energy Transfer Equity, L.P.

MacInnis on Monday said that after an evaluation of the company’s alternatives, the board concluded the deal with Energy Transfer is in the best interest of the company’s stakeholders. Shares of energy companies have been slammed of late amid a drop in oil prices, with Williams and Energy Transfer shares both declining more than 25% in the past three months. A downturn in commodities prices has had stronger companies across the industry—including exploration and drilling companies—eyeing rivals as potential acquisition targets. 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.

Williams has significant fuel-moving capabilities in the northeastern U.S., while most of Energy Transfer’s pipelines are located across the south and Midwest. 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.

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