A Delaware judge ordered oil pipeline operator Energy Transfer LP to pay rival Williams Cos $410 million for abandoning their $33 billion merger, one of the largest transactions to fall victim to sinking oil prices.
In a 95-page decision on Dec. 29, Vice Chancellor Sam Glasscock of Delaware Chancery Court said Energy Transfer owed the breakup fee for breaching the September 2015 merger agreement by issuing preferred securities five months later.
Energy Transfer offered the securities only to insiders, in what one Williams director called a "sweetheart deal" for them and co-founder Kelcy Warren, Energy Transfer's billionaire chairman and at the time chief executive.
Glasscock wrote that while Dallas-based Energy Transfer had validly terminated the merger, it was contractually obligated to pay the breakup fee and thus must "pay the piper."
The judge also said Williams must cover Energy Transfer's costs to issue a subpoena and seek sanctions after Williams Chief Executive Alan Armstrong deleted a Gmail account, which Energy Transfer claimed he used to discuss scuttling the merger.
In an emailed statement on Thursday, Energy Transfer said it was "extremely disappointed" in the decision and evaluating its legal options.
Williams, based in Tulsa, Oklahoma, said it was "obviously pleased" it could recoup the $410 million breakup fee, plus interest and legal costs.
The merger collapsed in the spring of 2016 after oil and gas prices tumbled, hurting shares of both companies and prompting investor concern the merged company would have too much debt.
Following a trial, Glasscock in June 2016 let Energy Transfer pull out of the merger after its tax advisers were unable to certify that the transaction would be tax-free to investors as originally envisioned.
Glasscock subsequently ruled in December 2017 that Energy Transfer was not entitled to a $1.5 billion breakup fee from Williams, saying it would amount to a "windfall" for walking away.
Recommended Reading
Industry Warns Ruling Could Disrupt GoM Oil, Gas Production
2024-09-12 - The energy industry slammed a reversal on a 2020 biological opinion that may potentially put an indefinite stop to oil and gas operations in the Gulf of Mexico—by December.
Pitts: Oh, What a Tangled Web the Supermajors Weave
2024-07-23 - Exxon and Chevron and Guyana and Venezuela—‘Let’s Make A Deal’ meets ‘Love, South American Style.’
Noble’s $1.59B Diamond Offshore Acquisition Clears Antitrust Hurdle
2024-07-28 - Noble Corp.’s acquisition of Diamond Offshore Drilling still requires approval by Diamond shareholders as well as regulatory authorization in Australia.
US Court Overturns Alaska Oil Lease Sale in a Win for Environmentalists
2024-07-17 - The ruling affects a lease sale held in December 2022 of offshore tracts for oil and gas development in the Cook Inlet in the northern Gulf of Alaska.
Despite Court Ruling, Williams Running Mid-Atlantic NatGas Project
2024-08-09 - Williams opened its Regional Energy Access Project despite an appellate court vacating its FERC permit. Williams plans to seek a temporary permit to keep the new system open.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.