http://blogs.wsj.com/moneybeat/2016/05/05/ceo-energy-transfer-cant-close-williams-deal/?mod=yahoo_hs
By
Alison Sider
May 5, 2016 3:43 pm ET
Energy Transfer Equity Chief Executive Kelcy Warren did not mince words Thursday: His company’s proposed takeover of Williams can’t go forward as is.
“We can’t close this transaction,” Mr. Warren told analysts and investors during a quarterly call. “Absent a substantial restructuring of this transaction, which Energy Transfer has been very willing and actually desiring to do, absent that—we don’t have a deal.”
The stumbling block of the moment is a tax ruling Energy Transfer needs to obtain from its lawyers at Latham & Watkins LLP. The company has said the law firm can’t give the required opinion that the deal will be tax free for investors. Energy Transfer executives said Thursday that they ran the analysis by other legal experts, who reached the same conclusions.
Energy Transfer first raised the prospect that the lawyers wouldn’t sign off last month. Thomas Mason, the company’s general counsel, conceded that it was “somewhat perplexing” that the tax troubles weren’t spotted sooner.
“It was one of those lightbulb kind of things that came up a few weeks ago,” Mr. Mason said Thursday.
Williams has said it believes the risks are minimal but said in a securities filing Wednesday that it has offered two different alternatives to avoid the perceived problem. Energy Transfer has said it doesn’t believe those will work. Williams declined to comment Thursday and did not discuss the transaction during its own quarterly conference call.
The pipeline deal, once valued at $33 billion, has been contentious from the start, and is currently mired in lawsuits.
Another point of conflict is the cash component. Williams initially resisted Energy Transfer’s overtures last year, but eventually capitulated after Energy Transfer offered to pay for part of the deal with up to $6.05 billion in cash.
But oil prices continued to fall after the deal was announced, putting both companies in a more precarious position. Now Energy Transfer says paying all that cash will mean taking on too much additional debt–the company wants to pay for Williams with just stock.
“To burden this resulting combined company with that much debt—that’s just not good business judgment,” Mr. Warren said Monday.
"Then there was a woman, a lion of a woman."
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