... Energy Transfer Acquiring Williams Companies  

Energy Transfer Acquiring Williams Companies

ENERGY_TRANSFER_logoWilliams Partners and The Williams Companies Inc., the owner of Williams Partners’ general partner, signed an agreement whereby both parties have terminated their previously announced merger agreement thus paving the way for Energy Transfer Equity (ETE) to acquire The Williams Companies.

In connection with the termination of the merger agreement, Williams has agreed to pay a termination fee to Williams Partners in the amount of $428 million. 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).

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“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,” said Frank T. MacInnis, chairman of the Williams board of directors. “The merger provides Williams stockholders with compelling value today as well as the opportunity to benefit from enhanced growth projects.”

Williams and ETE announced the business combination transaction, which is valued at approximately $37.7 billion, Sept. 28. The transaction includes the assumption of debt and other liabilities.

ETE’s willingness to proceed with the proposed acquisition was contingent on the termination of the Williams/Williams Partners transaction. Both entities’ boards of directors approved the business combination, which will create the third largest energy franchise in North America and one of the five largest global energy companies. The combination will also benefit customers by enabling further investments in capital projects and efficiencies that would not be achievable absent the transaction.

“I am excited that we have now agreed to the terms of this merger with Williams,” said Kelcy Warren, ETE’s chairman. “I believe that the combination of Williams and ETE will create substantial value for both companies’ stakeholders that would not be realized otherwise.”

Under the terms of the transaction, Energy Transfer Corp. (ETC), an affiliate of ETE, will acquire Williams at an implied current price of $43.50 per Williams share

“Williams’ intense focus on connecting the best natural gas supplies to the best natural gas markets will be a significant complement to the ETE family of diverse energy infrastructure,” said Alan Armstrong, president and CEO of Williams. “As a combined company, we will have enhanced prospects for growth, be better able to connect our customers to more diverse markets, and have more stability in an environment of low commodity prices. Importantly, Williams Partners will retain its current name and remain a publicly traded partnership headquartered in Tulsa, Oklahoma.”

During the course of its diligence process over the last 10 weeks, the Energy Transfer family has identified significant commercial synergies. These synergies run across a broad spectrum, ranging from new revenue opportunities, improved operational efficiencies and performance, new capital opportunities and prioritization of existing capital projects. ETE expects that the anticipated EBITDA from these commercial synergies will exceed $2 billion per year by 2020 (or more than 20% of the estimated current pro forma EBITDA for the combined company) and will require overall incremental capital investment of more than $5 billion to achieve.

As part of the merger, Williams Partners (WPZ) will retain its current name and remain a publicly traded partnership headquartered with a meaningful ongoing presence in Tulsa, Oklahoma. Also as a result of this announcement, Williams and Williams Partners are withdrawing their financial guidance. ETE expects no impact from this transaction on the credit ratings of ETP, SXL, Sunoco LP or Williams Partners.

The closing of the transaction is subject to customary conditions, including the receipt of approval of the merger from Williams’ stockholders and all required regulatory approvals, including approval pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR”). ETE and Williams anticipate that the transaction will be completed in the first half of 2016.

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