Energy Transfer and Williams agree $33bn deal

December 2015 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

After a yearlong chase, Energy Transfer Equity LP has finally agreed to acquire rival firm Williams Cos Inc in a deal worth around $33bn.

The deal, once completed, will create a natural gas superpower. The two companies will have a combined network of more than 100,000 miles of oil and gas pipelines stretching across the US.

Under the terms of the deal, Williams’ existing shareholders will be able to choose shares of Energy Transfer Equity affiliate Energy Transfer Corp, cash or a combination of both. Should they choose a cash payment, Energy Transfer will pay around $43.50 per share of the company held, a 4.6 percent premium to the company’s closing price on the last day of trading before the deal was announced. Williams’ stockholders will also receive a one-time special dividend of 10 cents per share. The companies have announced that the dividend will be paid immediately before the acquisition closes.

The total enterprise value of the transaction will be around $37.7bn, including the assumption of existing debt and a number of other liabilities. The deal is subject to the customary closing conditions, including approval by Williams’ shareholders and the appropriate regulatory bodies. Both sides expect the deal to close in the first half of 2016.

The agreed price represents a significant climb down for Williams. In June, the firm rejected an unsolicited offer with an implied value of $53.3bn, claiming that the offer was too small. However, with crude oil down more than 50 percent at the time of the deal, the company felt the time was right to act. In a joint statement announcing the deal, Frank T. MacInnis, chairman of the Williams board of directors, said: “After a comprehensive evaluation of strategic alternatives, including extensive discussions with numerous parties, the Williams board of directors concluded that a merger with Energy Transfer Equity is in the best interests of Williams’ stockholders and all of our other stakeholders. The merger provides Williams stockholders with compelling value today as well as the opportunity to benefit from enhanced growth projects.”

Upon closing, Williams will retain some degree of autonomy. It will keep its name, stay headquartered in Tulsa, Oklahoma, and remain a publicly traded partnership.

The deal for Williams will provide Energy Transfer Equity with a solid standing in the deep water Gulf of Mexico. It will also position the company at the forefront of the US shale market by providing access to the Northeast’s Marcellus Shale. Kelcy Warren, chairman of Energy Transfer, said: “I am excited that we have now agreed to the terms of this merger with Williams. I believe that the combination of Williams and ETE will create substantial value for both companies’ stakeholders that would not be realised otherwise.”

Furthermore, Mr Warren told investors that the deal for Williams will help provide the company with much needed stability as the commodities market continues to falter. The deterioration of the oil market has hastened the process of consolidation in the energy market considerably. In addition to the Williams/ Energy Transfer Equity deal, this summer a partnership controlled by refinery and pipeline company Marathon Petroleum Corp announced that it had agreed to acquire MarkWest Energy Partners LP for $15.8bn.

According to data from Dealogic, $337bn worth of energy deals have been struck so far this year. With Energy Transfer still believed to be keen on sealing additional deals, that figure may well increase.

The deal will see Energy Transfer add Williams Partners to the other publicly traded partnerships that the company controls: Energy Transfer Partners LP, Sunoco LP and Sunoco Logistics Partners LP.

However, as part of the deal, Williams has abandoned a plan it announced last May to buy its affiliated partnership, Williams Partners, in a $13.8bn deal. The collapse of that deal will see Williams Cos pay $428m in termination fees.

Richard Summerfield