Williams said it has agreed to be acquired for about $37.7 billion, including the assumption of debt and other liabilities. Williams Cos. will merge into a new company. In June, ETE made public its then six-month effort to court Williams with a $53.1 billion bid.
ETE sent letters to the company about a possible deal, which offered a 32% premium to Williams' last closing price of $64 per share.
Despite the price drop, the underlying value of the transaction remains the same as earlier bids. ETE will acquire Williams at the same value relative to ETE but also included about $6 billion in cash along with stock.
Williams said at the time that the offer undervalued the company. In the deal announced Sept. 28, the implied offer price is $43.50 per WMB, a 4.6% premium over Williams’ $41.50 closing share price on Sept. 25.
The combination will create the third largest energy franchise in North America and one of the five largest global energy companies, Williams and ETE said.
As part of the merger, Williams will terminate a $13.8 billion deal to merge with Williams Partners LP (NYSE: WPZ). Williams Cos. will pay WPZ a $428 million break fee for the termination of the merger.
WPZ will remain a publicly traded partnership with headquarters in Tulsa, Okla. ETE expects no impact on the credit ratings of WPZ, said Mark Reichman, research director, Simmons & Co. International.
WPZ is a MLP with operations across the natural gas value chain in major U.S. basins including the Marcellus, Utica, Piceance, Four Corners, Wyoming, Eagle Ford, Haynesville, Barnett, Midcontinent and Niobrara. It owns natural gas pipelines, including Transco, Northwest and Gulfstream, and also offers oil and natural gas gathering services in the Deepwater Gulf of Mexico.
“WPZ unit holders are expected to benefit from greater distributable cash flow from cost savings and synergies of up to $400 million per year following WPZ joining the Energy Transfer shared service model,” Reichman said.
ETE will form a partnership that will be treated as a corporation for tax purposes called Energy Transfer Corp. LP (ETC) that will merge with Williams. Shareholders may choose to receive either ETC shares or ETC shares and cash or cash, Reichman said.
As part of the merger, Williams Cos. stockholders may elect to receive all cash or all ETC shares, each WMB share would receive $8 in cash and 1.5274 ETC shares.
Tudor, Pickering, Holt & Co. said the transaction is positive for ETE and WPZ and that the deal offers the same ratio as ETE’s original offer but with up to $6.1 billion in cash.
“We liked the deal as proposed three months ago and still do,” Tudor, Pickering, Holt said.
Williams made a comprehensive evaluation of strategic alternatives before deciding that a merger with ETE is in the best interests of Williams’ stockholders, said Frank T. MacInnis, chairman of the Williams board.
“The merger provides Williams stockholders with compelling value today as well as the opportunity to benefit from enhanced growth projects,” MacInnis said.
Among ETE, Williams and WPZ, the companies are collectively pursuing $30 billion worth of growth projects.
ETE management said the deal is immediately accretive with $2 billion in commercial synergies by 2020. WPZ also benefits with $400 million in expected synergies. ETE has agreed to create a contingent consideration right (CCR), a one-time payment mechanism two keep it and ETC in parity.
The transaction is expected to close in the first half of 2016, subject to customary closing conditions including approval by WMB shareholders and required the clearing of antitrust regulations under the Hart-Scott-Rodino Act.
- Energy Transfer Corp. GP LLC and Energy Transfer Corp. LP (ETC) are formed; ETC will choose to be taxed as a corporation for federal tax purposes;
- ETC issues shares and cash to WMB stockholders in exchange for all outstanding shares of WMB
- WMB merges into ETC, with ETC the surviving entity;
- ETE will provide all administrative services to ETC;
- ETC will benefit from a dividend equalization agreement through 2018 in which ETE and ETC shareholders receive the identical cash dividends; and
- WMB’s revolving credit facility will be terminated at closing.
Darren Barbee can be reached at email@example.com.
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