Williams Cos agrees to $37.7 billion buyout by Energy Transfer

28 Sep 2015 | Author: | No comments yet »

Energy Transfer to buy Williams in $32.9 billion deal.

The combination will create the third largest energy franchise in North America and one of the five largest global energy companies, the two companies said Monday. HOUSTON — The Williams Cos. said Monday it will accept an offer from rival Energy Transfer, ending months of tortuous negotiation with a deal worth $32.9 billion.Investors are balking at Energy Transfer Equity’s (ETE -8.9%) just-announced merger with Williams Cos. (WMB -8.6%), as shares in the two oil and gas pipeline companies sell off sharply.

Under the terms of the acquisition, Energy Transfer, an affiliate of Energy Transfer Equity, will purchase Williams in a cash and stock deal priced at $43.50 per Williams share, a 4.6% increase from its closing price on Friday. The purchase is the second-largest energy deal announced this year, behind only Royal Dutch Shell’s $70 billion acquisition of natural gas producer BG Group in April, and it’s the largest combination announced since oil prices slid from near $60 per barrel highs earlier this year. WMB appears not to have needed to do much to sweeten its offer: “At first glance, it seems as if the bid matches ETE’s original offer made in June,” Raymond James analysts say – since both companies’ shares have fallen since the potential deal first became public, the headline deal number is now much lower than the $48B value announced in June.

While plunging oil and natural gas prices have not hit pipeline operators as hard as other energy companies, analysts say the group is facing pressure to merge; prices also have fallen for fuels such as ethane and propane, which has hurt companies like WMB, which processes natural gas. Despite the immediate negative reaction, ETE claims the merger will enable it to capture $2.4B or more in commercial and cost-saving synergies over the next few years.

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. Williams Partners L.P., an asset-holding subsidiary of The Williams Companies Inc, will shift into the Energy Transfer family of companies but will keep its name and continue to trade separately. 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.

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