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Williams Cos. (NYSE: WMB) declared a quarterly dividend of $0.64 per share, or $2.56 annualized.
The dividend will be payable on June 27, 2016, to stockholders of record on June 20, 2016, with an ex-dividend date of June 16, 2016.
The annual yield on the dividend is 10.9 percent.
Thank you very much. I'm trying to decide if I should buy ETE or split between the two. After reading that it seems WMB would be the better deal.
Thanks again
These were the original options
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=117332241
And they remain the same according to the most recent filiing
https://www.sec.gov/Archives/edgar/data/107263/000119312516601694/d80568ddefm14a.htm
For each share of WMB: You can exchange for....
$8.00 in cash and 1.5274 common shares representing limited partner interests in ETC (“ETC common shares”) (the “mixed consideration”); or
1.8716 ETC common shares (the “share consideration”); or
$43.50 in cash (the “cash consideration”).
WMB stockholders that elect to receive the share consideration or the cash consideration will be subject to proration to ensure that the aggregate number of ETC common shares and the aggregate amount of cash paid in the merger will be the same as if all electing WMB shares received the mixed consideration. The receipt of the merger consideration is expected to be tax-free to the WMB stockholders, except with respect to any cash received. In addition, WMB is entitled to declare a special, one-time dividend of $0.10 per share of WMB common stock, to be paid to holders of record immediately prior to the closing of the merger and contingent upon consummation of the merger.
_______________________________________________________________
I would have thought the cash consideration would have been changed all considering, but I guess not. Once set in stone, set in stone?
If this deal goes through do you get 1 unit of ete for 1 unit of wmb?
Accusations fly as Williams files lawsuit to save deal with ETE
http://finance.yahoo.com/news/accusations-fly-williams-files-lawsuit-050001783.html
May 16 (Reuters)
May 16 (Reuters) - The war of words between U.S. pipeline operators Williams and Energy Transfer Equity (ETE) has worsened after Williams filed a lawsuit to pressure its would-be buyer to proceed with their merger agreement.
Williams has accused ETE of trying to get out of the $20 billion deal and filed a lawsuit late on Friday seeking to prevent the Dallas-based firm from terminating its takeover over a tax issue or if the deal isn't closed by a June 28 deadline.
Williams said in a statement that ETE has used "delay and obstruction" to try and wriggle out of its agreement but ETE responded on Sunday by saying the lawsuit was an attempt to gain leverage in any future deal talks between the two companies and would delay any progress.
"ETE is disappointed that Williams, rather than seriously engaging in discussions regarding the existing transaction, has chosen to file a third separate lawsuit in the last six weeks regarding our pending merger," Kelcy Warren, the chief executive of ETE, said in a statement.
Williams declined to comment.
The lawsuit is the latest twist in what has been a testy transaction almost from the get-go.
Dallas billionaire Warren set his sights on Tulsa, Oklahoma-based Williams last year to transform his empire into one of the world's biggest pipeline networks, launching an unsolicited bid in June and reaching a deal in late September that was then worth around $33 billion.
The timing was poor. Oil and gas prices dropped significantly after it was announced, the companies' shares dropped sharply and investors started to worry that the $6 billion cash portion of the deal would saddle ETE with too much debt.
But the Williams' board, which was initially split on the transaction, came out in support of the deal as oil prices spiralled further south.
TAX ISSUE
Warren said on Sunday that circumstances had changed since the companies struck their deal, and suggested that Williams' board should revisit its recommendation that shareholders vote in favor of the merger.
Warren said that Williams has prevented ETE from reaching out to its board and did not respond to its requests before filing the latest lawsuit.
In recent weeks, ETE has said that it can't complete the acquisition because its lawyers can't guarantee that the deal will be a tax-free transaction for Williams shareholders. Obtaining a favorable opinion on the tax issue from Energy Transfer's lawyers is a requirement for the deal to close.
Williams has said it disagrees with the lawyers' assessment of the tax risks. It has remained steadfast to the original terms.
The stand-off, preceded by a lawsuit and a countersuit both alleging breaches of the agreement, underscores how acrimonious relations have gotten between the two sides.
Warren has said ETE would be open to a deal that would remove the cash portion of its cash-and-stock offer for Williams.
ETE has slashed its estimates for cost savings from the deal and warned it would likely have to cut its distributions to shareholders entirely next year if it has to complete it. The company has also said that it will have to cut jobs substantially in Williams' home state of Oklahoma.
(Reporting by Parikshit Mishra in Bengaluru; Writing by Carmel Crimmins in New York; Editing by Muralikumar Anantharaman)
ETE says Williams filed lawsuit to gain leverage in deal talks
Mon, May 16, 2016, 9:57AM EDT
http://finance.yahoo.com/news/ete-says-williams-filed-lawsuit-010426496.html
May 15 (Reuters) - Energy Transfer Equity LP on Sunday accused its buyout target Williams Companies Inc of filing a third lawsuit against it in an attempt to gain leverage in any future deal talks between the two pipeline companies.
Williams filed its latest lawsuit in a Delaware court on Friday to prevent ETE, which has said the economics of its takeover of Williams have been altered by the fall in oil prices, from terminating that deal..
"...We believe Williams' latest lawsuit is an attempt to gain undue leverage in and undermine future discussions regarding the pending merger and will only result in further delay," ETE Chief Executive Kelcy Warren said in a statement on Sunday.
Williams on Sunday declined to comment. The company has alleged that ETE is looking into ways to walk away from the tie-up even though the terms of the deal would not allow that before June 28.
Dallas-based ETE said it is asking the Williams board to reconsider whether it still recommends its shareholders approve the deal given material changes since they reached agreement on Sept. 28 for ETE to acquire Williams in a transaction originally valued at nearly $33 billion.
ETE said last month that its lawyers may not be able to deliver an important tax opinion for its takeover of Williams, throwing the agreed acquisition into doubt.
The company said that before the suit was filed, it was making progress towards clearing all comments by the U.S. Securities and Exchange Commission and finalizing a prospectus for Williams' shareholders.
ETE also said that Williams has prevented it from reaching out to its board and did not respond to its requests before filing the lawsuit.
ETE slashed its expectations from the Williams deal in March saying that cost savings could be all but wiped out by low oil prices and higher capital costs.
ETE had said, in a SEC filing, that it expects the base case for earnings before interest, taxes, depreciation and amortization from commercial synergies from the deal to be about $170 million a year by 2020, compared with previous forecasts of more than $2 billion.
Tulsa, Oklahoma-based Williams had also filed a suit earlier against ETE in Delaware to stop a controversial offering of preferred shares to its top shareholders. It has also sued Warren in Texas over the same offering.
(Reporting by Parikshit Mishra in Bengaluru; Editing by Cynthia Osterman)
Williams Files Lawsuit Seeking to Prevent ETE from Avoiding Its Obligations under the Merger Agreement
Williams Board Unanimously Committed to Enforcing Williams’ Rights and Delivering Benefits of Merger Agreement to Williams’ Stockholders
Business Wire
The Williams Companies, Inc.
May 13, 2016 9:25 PM
http://finance.yahoo.com/news/williams-files-lawsuit-seeking-prevent-012500934.html
The Williams Companies, Inc. (WMB) (“Williams” or “WMB”) today announced that it has filed an action in the Delaware Court of Chancery seeking a Declaratory Judgment and Injunction preventing Energy Transfer Equity, L.P. (ETE) (“ETE”) from terminating or otherwise avoiding its obligations under the Merger Agreement entered into with Williams on September 28, 2015.
Specifically, the lawsuit asks the Court to prohibit ETE from relying on either (i) any failure to close the transaction by the current “Outside Date” of June 28, 2016 or (ii) any failure to obtain a Section 721(a) tax opinion from Latham & Watkins LLP (ETE’s outside counsel), as a basis for ETE to avoid fulfilling its obligation to close the proposed transactions with Williams. Williams alleges that ETE has breached the Merger Agreement through a pattern of delay and obstruction designed to allow ETE to avoid its contractual commitments. Williams believes that the Merger Agreement prevents ETE from doing so.
The Williams Board is unanimously committed to enforcing Williams’ rights under the Merger Agreement entered into with ETE on September 28, 2015 and to delivering the benefits of the Merger Agreement to Williams’ stockholders. This action was filed with that goal in mind. The Williams Board has not changed its recommendation "FOR" the Merger Agreement executed on September 28, 2015.
As previously announced, Williams has commenced separate litigation against ETE and its chairman and chief executive officer Kelcy Warren in response to the private offering of Series A Convertible Preferred Units that ETE disclosed on March 9, 2016. The litigation against ETE in the Delaware Court of Chancery seeks to unwind the private offering of Series A Convertible Preferred Units. The Delaware Court of Chancery has granted Williams’ motion to expedite the litigation. The litigation against Kelcy Warren in the district court of Dallas County, Texas, is for tortious, or wrongful, interference with the Merger Agreement executed on September 28, 2015 as a result of the private offering of Series A Convertible Preferred Units.
Williams is committed to mailing the proxy statement, holding the stockholder vote and closing the transaction as soon as possible. In addition to the receipt of Williams’ stockholder approval, the transaction remains subject to other customary closing conditions. Integration planning is underway.
Energy Transfer Equity LP-Williams Companies Inc Merger About to Be Called Off
Bidness Etc reviews how analysts are reacting to speculation that the deal will be terminated soon
By Micheal Kaufman on May 9, 2016 at 9:43 am EST
http://www.bidnessetc.com/68663-energy-transfer-equity-lpwilliams-companies-merger-called-o/
Energy Transfer Equity LP (NYSE:ETE) and Williams Companies’ Inc.’s (NYSE:WMB) $37.7 billion merger is on the verge of falling part, owing to increasing differences between the two, and challenging market conditions. Analysts who had previously expected the deal to be finalized over the coming months, are now expecting a break-up.
Since Energy Transfer had offered to pay $6 billion to Williams Companies shareholders, the deal was a win-win. With the acquisition, Energy Transfer CEO and chairman Kelcy Warren wanted to build the world’s biggest owner and operator of an oil and gas pipeline network. He had expected the cost and revenue synergies to stand at $2 billion.
The ongoing dispute between the managements at the two companies, along with a prolonged decline in commodity prices, is forcing the deal towards its end. The multi-billion dollar merger, which could have resulted in one of the world’s biggest energy infrastructure companies, took around seven months to reach this stage.
The ongoing problems have convinced traders and analysts that the deal will not close. Last month, Evercore ISI analyst Timm Schneider conducted a survey of clients, finding that around 50% of his clients expected the deal to be finalized. However, owing to the worsening market situation, the spread coming from those expecting the merger to break apart has increased. According to Bloomberg, the spread has more than doubled since April.
The reaction of analysts can be gauged from the fact that instead of pricing the companies together, the sell-side firms have started valuing the energy giants individually. Raymond James & Associates analyst Darren Horowitz also mentioned that he is adjusting Williams Companies’ valuation to take into account the current situation. His current valuation is taking “Energy Transfer out of the picture.”
Plunging Deal Value
Since the announcement of the deal, United States Brent Oil Fund, LP (NYSEARCA:BNO) has fallen almost 16.5%, while United States Oil Fund LP (ETF) (NYSEARCA:USO) has dropped 25.5%. The continuous decline in oil prices has eroded investor confidence regarding both the companies, and has increased the merger arbitrage. Energy Transfer shares have plunged 44% since September 28, while Williams Companies shares have dropped over 52.5%.
The low oil and gas prices have made Energy Transfer’s offered price expensive. Including debt assumption, the deal was worth more than $37 billion in September. However, it is now valued at less than $20 billion. The cash portion of $6 billion, which was just a small part of the initial proposal, now carries a high weightage in the offer.
Low Oil Prices: Not the Only Reason
Apart from weak commodity prices, the clash between the two companies has also raised doubts about the completion of the merger. The conflict erupted in March, when Energy Transfer issued preferred units to some of its investors. Williams Companies had previously rejected a proposal to offer common units to the general public. Thus, in order to finance part of the deal, Energy Transfer issued new shares in a private placement, without Williams Companies’ approval. Mr. Warren also received 50% of the new shares in the private offering. He already owns 18% of the company.
Dissatisfied with the offering, Williams Companies deemed it “malicious.” It said with the private placement, Energy Transfer has breached the terms of the merger agreement and has given preferential treatment to some of its shareholders against others. The company later filed a law suit against Energy Transfer and Mr. Warren in April.
It did not end here. Latham & Watkins’ refusal to provide a tax opinion to the deal ignited another round of arguments between the two companies. Energy Transfer’s law adviser said it cannot deliver the “721 Opinion” to the transaction, as it believes the exchange offer does not qualify as a “reorganization” that would free investors from tax liabilities. Latham said it had also received the same opinion from other tax advisory authorities.
In its 1Q earnings call, Mr. Warren emphasized that the deal could not be completed without the necessary tax opinion under Section 721 (a). According to news sources, he repeated around seven times that the merger could not be completed in its current form. Jefferies LLC analyst Chris Sighinolfi believes Energy Transfer’s recent comments during the earnings call have strengthened investors’ belief that the deal is unlikely to happen.
What if the Deal Fails?
Recently, the $34.6 billion tie-up between the world’s two biggest oilfield services providers, Halliburton Company (NYSE:HAL) and Baker Hughes ended. Increased pressure from regulatory authorities, including the US Department of Justice (DoJ) and the European Commission forced the two merger partners to call off the deal. The break-up has not only affected the future plans of both the companies, but also cost Halliburton around $3.5 billion.
The failure of the merger would cost each company billions of dollars. If Williams Companies backs out, it would have to compensate Energy Transfer with $1.48 billion. If Energy Transfer is the one to call it quits, it would not just have to face millions of dollars worth of lawsuits, but its reputation would also be hurt.
Energy Transfer has chased Williams Companies for months. In July, the company first made an unsolicited offer, which was rejected. In September, it approached Williams Companies with a new proposal. The offer had $6 billion in cash, which lured Williams Companies’ management to enter into the deal.
Certainly, after a yearlong chase and more than seven months under the merger agreement, if Energy Transfer withdraws from the deal, it would lose the confidence of investors and analysts. Mr. Sighinolfi also mentioned that the termination would not be good for Energy Transfer’s “reputation as a consolidator in the future.”
Finally, although the deal seems to be on the verge of breaking apart, the official deadline for the closing of the merger is June 28. The two companies still have time to work on the terms of the agreement to solve the tax issue. It now depends on the flexibility, and their willingness to finalize the deal as soon as possible.
CEO: Energy Transfer Can’t Close Williams Deal
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.
My guess is that this is a ploy by ETE to find a way out of this deal without having to pay penalties.
Taxes Throw New Wrinkle in Energy Transfer Equity LP's Merger Drama
Tax lawyers could cause more delays for its proposed merger with Williams Companies Inc.
http://www.fool.com/investing/general/2016/04/19/taxes-throw-new-wrinkle-in-energy-transfer-equity.aspx?source=yahoo-2&utm_campaign=article&utm_medium=feed&utm_source=yahoo-2
The proposed merger between Energy Transfer Equity (NYSE:ETE) and Williams Companies (NYSE:WMB) is becoming one of the most fascinating boardroom dramas to hit the energy patch in the past few years. Despite what both companies say, neither seems too thrilled with their deal and have been searching high and low for a loophole to break their commitment. The latest attempt at a breakup stems from a tax issue after Energy Transfer's lawyers said that they might not be able to issue an opinion on taxes, which could impact the company's ability to close the deal.
The tax delay
When Energy Transfer Equity and Williams Companies agreed to combine last fall, they decided on a cash-and-stock merger whereby Williams shareholders would receive $8 per share in cash with the rest of the $43.50 merger consideration being paid via shares of a new company called Energy Transfer Corporation. Unlike Energy Transfer Equity this new entity would not be an MLP, but instead would be a C-Corp like Williams Companies. Because of this structure, Energy Transfer noted in the press release announcing the deal that "the transaction is expected to be tax-free to Williams' stockholders, except with respect to any cash received."
However, in an SEC filing this week, Energy Transfer Equity revealed that it had yet to obtain a tax opinion for its proposed merger with Williams Companies from its tax lawyers. What the company needs is a 721 opinion, which would deem the deal to be tax free for Williams shareholders for the stock portion of the deal. As such, it is a potentially big deal breaker for Williams Companies' investors because they could be on the hook for a big tax bill if the completion of the merger is deemed to be a taxable event. That said, Williams disagrees with the opinion of Energy Transfer Equity's lawyers and doesn't think the deal will trigger any taxes for its investors.
Adding it to the list
This latest wrinkle in the deal is the first issue that has come up on the stock portion of the proposed transaction. Most of the issues prior to this have been on the cash portion of the deal, due primarily to the fact that Energy Transfer Equity will be borrowing an incremental $6 billion via a short-term bank loan to pay out the $8 per share in cash to Williams shareholders. It's debt that has the potential to sink both companies due to the oil market taking a turn for the worse since the deal's announcement. The debt has been called "mutually assured destruction" by Energy Transfer Equity's now former CFO, who was reportedly terminated for actively working to sabotage this deal.
It's the potential problems posed by the additional debt that led Energy Transfer Equity to issue Convertible Preferred Units to some of its investors in a private offering. In exchange those investors agreed to forgo their Energy Transfer Equity distributions for up to nine quarters so that the company could use the retained cash flow to whittle down its debt. However, it was an offering that Williams refused to sign off on, which is why it's now suing Energy Transfer Equity in order to reverse that exchange saying it gives favorable treatment to some investors, including Energy Transfers' CEO who was the recipient of half of the units. Not only that but, Energy Transfer had agreed not to "authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock" as part of its merger agreement with Williams. That makes it a potential breach of the merger contract, which could be enough for Williams to terminate the deal if it wins in court.
Investor takeaway
The merger of Energy Transfer Equity and Williams Companies is looking less likely to close with each passing day. Both companies are searching high and low for the loophole that will get them out of the deal, with the market hoping they find a solution soon. It will be interesting to see if they do find a way out, or if they're forced to close a transaction that at the moment no one wants to see happen, at least under the current terms
Williams Cos. (NYSE:WMB) says the Delaware Chancery Court will expedite its litigation against Energy Transfer Equity (NYSE:ETE) over private shares issued to help finance the pending merger of the two pipeline companies.
WMB filed the lawsuit last week, as well as a separate suit against ETE chief Kelcy Warren, accusing its planned acquirer and the CEO of violating the merger agreement with a private offering of debt.
WMB's board also reiterates its support for the merger, which is expected to close in Q2.
Williams (NYSE: WMB) and Williams Partners L.P. (NYSE: WPZ) plan to announce their first-quarter 2016 financial results after the market closes on Wednesday, May 4.
From the S4
Registration statement regarding the Merger
PAGE 182
http://www.sec.gov/Archives/edgar/data/1648098/000119312515386887/d80568ds4.htm
Termination of the Merger Agreement
The merger agreement may be terminated in accordance with its terms at any time prior to the effective time, whether before or after the requisite approval of WMB’s stockholders is obtained:
by mutual written consent of ETE and WMB; or
by either ETE or WMB:
if the merger is not consummated on or before June 28, 2016, subject to extension by the mutual written agreement of ETE and WMB and further subject to the extension by the written notice of either of ETE and WMB if all closing conditions except certain regulatory approvals are satisfied
(such date being referred to herein as the “outside date”), except that neither party may terminate under these circumstances if the terminating party’s breach of the merger agreement was a principal cause or resulted in the failure to consummate the merger by the outside date;
if any court or governmental entity of competent jurisdiction has issued any final and non-appealable law, injunction, order or other judgment restraining or enjoining the consummation of the transactions in the merger agreement (such stipulation being referred to herein as a “restraint”), except that neither party may terminate under these circumstances if its own failure to perform its obligations under the merger agreement was a principal cause of or resulted in the failure of the consummation of the transactions in the merger agreement; or
if the requisite approval of WMB’s stockholders is not obtained at the special meeting.
By ETE:
if WMB breaches any of its representations or warranties or fails to perform any of the covenants or agreements set forth in the merger agreement, and such breach or failure to perform (a) would give rise to the failure of a closing condition and (b) is incapable of being cured prior to the outside date; or
if WMB makes an adverse recommendation change or willfully and materially breaches its obligations in the merger agreement regarding the solicitation of acquisition proposals.
By WMB:
If either ETC or ETE breaches any of its representations or warranties or fails to perform any of its covenants or agreements set forth in the merger agreement, and such breach or failure to perform (a) would give rise to the failure of a closing condition and (b) is incapable of being cured prior to the outside date; or
at any time prior to obtaining the requisite approval of WMB stockholders in order to accept a superior proposal, provided that WMB simultaneously enters into an associated alternative acquisition agreement and pays the applicable termination fee to ETE pursuant to the merger agreement (as described below).
Effect of Termination
If the merger agreement is validly terminated there will be no liability or obligation on the part of ETC, ETE or WMB to the other parties except as related to the confidentiality of information, termination fees and certain other provisions of the merger agreement, and provided that (a) no party will be relieved from liability for any willful and material breach of any provision of the merger agreement and (b) the confidential disclosure agreement dated as of July 16, 2015, between ETE and WMB, shall survive such termination in accordance with its terms.
Termination Fees and Expenses
If the merger agreement is terminated:
by ETC or ETE following the failure of WMB stockholders to approve the merger proposal at the special meeting, then WMB will reimburse ETE for all out-of-pocket fees and expenses incurred in connection with the merger, up to $50.0 million;
by ETE or WMB due to the breach by the other party of its representations, warranties, covenants or agreements as set forth in the merger agreement, then the breaching party will reimburse all out-of-pocket fees and expenses incurred by the other party in connection with the merger, up to $100.0 million.
WMB will pay ETE a termination fee equal to $1.48 billion, if:
WMB terminates the merger agreement to accept a superior proposal;
ETE terminates the merger agreement due to a change in the WMB Board’s recommendation of the merger to WMB stockholders;
ETE terminates the merger agreement due to a breach by WMB of its non-solicitation obligations; or
(a) after the date of the merger agreement and prior to the special meeting, a takeover proposal is publicly announced, publicly disclosed or otherwise communicated to WMB, which takeover proposal shall not be withdrawn for at least seven business days prior to the special meeting, (b) thereafter, the merger agreement is terminated (i) by either ETE or WMB following the failure of WMB stockholders to approve the Merger Proposal at the special meeting, (ii) by either ETE or WMB for a failure to consummate the merger on or before the outside date, or (iii) by ETE following a breach by WMB of its covenants or agreements not to solicit a takeover proposal, to hold the special meeting, to aid in the preparation of the prospectus/proxy statement or to negotiate with ETE for three business days after informing ETE of a superior proposal and (c) WMB enters into a definitive agreement with respect to a transaction contemplated by a takeover proposal or consummates a takeover proposal within 12 months of the date the merger agreement is terminated.
In the event such a termination fee is paid as described above, payment of such fee is ETC and ETE’s sole and exclusive remedy against WMB and its affiliates, except in the case of a willful and material breach by WMB of certain provisions in the merger agreement.
ETE will reimburse WMB $410 million in respect of a portion of the termination fee payable by WMB to WPZ to terminate the WPZ merger agreement and to reimburse WMB’s expenses in an amount up to $100 million if certain conditions to WMB’s obligation to consummate the merger have not been satisfied and the merger agreement is terminated by ETE or WMB: (i) due to a permanent injunction or final, non-appealable governmental order or action being in effect, (ii) ETE or ETC’s breach of any of its representations, warranties, covenants, or agreements set forth in the merger agreement, or (iii) the failure to consummate the merger within the outside date in certain circumstances.
Analyzing the ETE-WMB Merger: Deal or No Deal?
Part 2
http://marketrealist.com/2016/04/analyzing-ete-wmb-merger-deal-no-deal/
Uncertainties surrounding the merger
The Energy Transfer Equity (ETE)-Williams Companies (WMB) merger has been surrounded by uncertainties since its announcement in September of last year. Below are the series of events that raised uncertainty about the pending merger and increased the volatility in both of the stocks.
The fall in energy prices raised questions about the timing of the deal.
Energy Transfer Equity’s replacement of its CFO, Jamie Welch, the main architect behind the deal, raised concerns about the prospects of the deal. Later, Welch reportedly called Williams Companies’ shareholders and urged them to vote against the deal in its current form.
There’s speculation in the Market that Energy Transfer Equity wants to pull out of the deal.
Energy Transfer Equity lowered the expected merger synergies.
Williams Companies filed a litigation against Energy Transfer Equity’s private offering.
Merger synergies
In a Form S-4 filed with the U.S. Securities and Exchange Commission on March 23, 2016, Energy Transfer Equity decided to reduce the expected merger synergies to $170 million per year by 2020. This is significantly less than the $2 billion per year merger synergies estimated at the time of the merger announcement.
Apart from reduced synergies, Energy Transfer Equity also mentioned in the filing that the additional $6 billion debt for financing the merger could “adversely affect ETE’s credit ratings.”
Another important change that Energy Transfer Equity made in the filing was related to its future presence in Tulsa. When the deal was announced in September 2015, Energy Transfer Equity said that it would maintain a “meaningful presence” in Tulsa. However, according to the latest S-4 filing, Williams Companies’ presence in Tulsa “will need to be significantly reduced” “or potentially eliminated.” Williams Companies is an important company in Tulsa. It has a huge workforce and influence there. The above changes are seen as efforts by Energy Transfer Equity to make the deal look as unattractive as possible.
Analysts’ targets
On a broader level, ~66.7% of the analysts rate Energy Transfer Equity a “buy” and the remaining ~33.3% rate it a “hold.” The median target price of $15 for Energy Transfer Equity implies an ~116.1% price return in the next 12 months from its April 6, 2016, closing price of $6.94. Williams Companies has a “hold” rating from 54.6% of the analysts. Energy Transfer Equity’s MLP subsidiary, Energy Transfer Partners (ETP), has a “buy” rating from 71.4% of the analysts while 58.3% of the analysts rated Williams Partners (WPZ) a “hold.” Energy Transfer Partners forms 0.12% of the SuperDividend U.S. ETF (DIV).
Why Is Williams Companies Suing Energy Transfer Equity?
part 1
http://finance.yahoo.com/news/why-williams-companies-suing-energy-154449123.html
Why Is the ETE-WMB Merger a Controversial Deal?
Williams Companies sued Energy Transfer Equity
Energy Transfer Equity (ETE) and Williams Companies (WMB) are among the most talked about companies in the midstream energy sector since their merger announcement. They were in the news again on April 6, 2016. Williams Companies decided to sue Energy Transfer Equity and its CEO, Kelcy Warren, over a private offering. However, Williams Companies is still committed to completing the merger.
According to Williams Companies, the private offering completed by Energy Transfer Equity in March 2016 was a breach of the merger agreement. It provides “select ETE investors with preferential treatment on ETE distributions.”
According to Williams Companies’ suit, “With full knowledge that ETE may cut its distributions significantly, Mr. Warren designed the Special Offering to ensure that he personally will continue to receive cash distributions at current levels, while other investors in ETE may not.”
Energy Transfer Equity’s private offering
Energy Transfer Equity completed a private offering of 329 million Series A Convertible Preferred Units to certain Energy Transfer Equity common unitholders, including Kelcy Warren, on March 8, 2016. The offerees decided to forgo a portion of their future potential cash distributions on Energy Transfer Equity common units for a period of up to nine fiscal quarters. “The Convertible Units will automatically convert into ETE common units at the end of the plan period.” The forgone distribution will be used to repay proposed debt issuance for the payment of the cash portion of the deal.
Energy Transfer Equity defended itself. It stated that “it has complied, and it intends to continue to comply, with its obligations under the merger agreement with Williams and intends to vigorously defend against the claims made by Williams.”
Stock price reaction
Both, Energy Transfer Equity and Williams Companies stocks rose following the announcement indicating investors’ positive reaction towards the possible deal fall out. Until yesterday, Energy Transfer Equity and Williams Companies fell 71.8% and 64.4%, respectively, since the merger announcement. Energy Transfer Partners (ETP) and Williams Partners (WPZ)—Energy Transfer Equity and Williams Companies’ MLP subsidiaries—lost 27.1% and 45.5% during the same period. Energy Transfer Partners forms 0.12% of the SuperDividend U.S. ETF (DIV
http://finance.yahoo.com/video/faber-report-lawsuit-watch-134300865.html
Fabor Report
@ 2:07 time point to 3:20 time
The Train Wreck Between William Companies and Energy Transfer Equity Appears Ready to Implode
http://www.fool.com/investing/general/2016/04/08/the-train-wreck-between-william-companies-and-ener.aspx?source=yahoo-2&utm_campaign=article&utm_medium=feed&utm_source=yahoo-2
Williams Companies lawsuit against merger partner Energy Transfer Equity could be the deal’s final straw.
The much maligned merger of Williams Companies (NYSE:WMB) and Energy Transfer Equity (NYSE:ETE) took another interesting twist this week. That's after Williams Companies sued Energy Transfer Equity to block a private preferred share offering it was undertaking to help pay for the deal. That lawsuit, however, could be the very thing that blows up this deal.
A slow moving train wreck
Initially, the proposed transaction was expected to be a game-changer in the energy midstream space. At the time Energy Transfer said that the "combination will create the third largest energy franchise in North America and one of the five largest global energy companies." Moreover, the deal was expected to deliver more than $2 billion of additional earnings by the end of this decade.
The deal, however, quickly went off the tracks after energy prices and access to credit collapsed causing serious doubt that the deal would close. Worse yet were fears that it would close because that would mean Energy Transfer Equity was on the hook to pay more than $6 billion in cash to Williams' shareholders because they'd agreed to a cash-and-stock transaction. That cash component, however, quickly became a sticking point that many believed would be the undoing of both companies because it would add more than $6 billion in new debt at a time when energy debt was a growing problem. In fact, Energy Transfer Equity's now former CFO reportedly told Williams Companies' investors that the cash portion of the deal was "mutually assured destruction." It was this active campaigning against the deal that reportedly led to his dismissal. Meanwhile, those $2 billion in synergies have quickly evaporated.
Back door dealing
In order to avoid that post-close implosion, Energy Transfer undertook a private offering of convertible shares to some of its investors. That offering resulted in those holders forgoing some of their distributions for up to nine quarters. That retained cash would enable Energy Transfer to whittle down some of the $6 billion in debt it would take on to pay off Williams' shareholders. However, it's an offering that Williams Companies has been against since the very beginning, with it not allowing its accounting firm to sign off on a public offering, which is why Energy Transfer went the private route.
It's this private offering that's now the center of the lawsuit. Williams is alleging "wrongful interference" with the merger agreement between the two companies. At issue is the growing likelihood that Energy Transfer Equity will have to reduce its distribution at some point in the future in order to pay for this deal. However, by giving these units to only some of the company's investors, including Energy Transfer CEO Kelsey Warren who was the recipient of half of those units, it has the potential to insulate them from that outcome. In a sense, they are getting paid in advance for taking the pay cut now, instead of joining the rest of investors taking a pay cut later. That's unacceptable to Williams, which wants all investors to be "treated fairly and equitably" in the deal.
Is this the end?
At the heart of the lawsuit, however, is the possibility that this private offering could have violated one of the terms of the merger agreement. According to that agreement Energy Transfer Equity is not allowed to "authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock." As such, Williams Companies could potentially terminate this agreement because of a breach of covenants.
While Williams has said it "looks forward to completing the transaction" this suit could very well be what blows up the deal. That's because otherwise this agreement is pretty iron clad, with one of the few ways to get out of the deal would be if Williams' shareholders voted it down. That said, it would actually have to pay Energy Transfer Equity $1.48 billion if it walked away, while its investors would at least walk away with $8 per share in cash, plus stock in the new Energy Transfer Corporation if they took the deal. Needless to say, it will be interesting to see the outcome of this lawsuit because it could really make or break this deal for both companies.
Does Suit Spell End of Williams-ETE Deal? Shares Rise on Hope
By Amey Stone
http://blogs.barrons.com/incomeinvesting/2016/04/07/does-suit-spell-end-of-williams-ete-deal-shares-rise-on-hope/?mod=yahoobarrons&ru=yahoo
The share prices of Williams Cos. (WMB), Energy Transfer Equity (ETE) and their related master limited partnerships have mostly risen for two days as investors judge that a new lawsuit between the parties is a sign the deal is likely to dissolve.
Reorg Research writes:
Market participants look at the move as a potential step toward blowing up the deal, and the securities of all the involved entities have benefited from that possibility.
As of mid-afternoon Thursday, ETE was at $7.16, up 11% from $6.45 at Tuesday’s close. WMB was at $15.70 a share, up from $14.81 at Tuesday’s close, a 6% rise. Williams Partners (WPZ) rose about the same amount. Energy Transfer Partners (ETP) was lower Thursday, but rose Wednesday.
Reorg Research also looked at some of the details of the lawsuit and the convertible securities at the heart of it. The research firm notes that ETE may have violated one of the terms of their agreement:
ETE is not permitted to “authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock … .” If Williams terminates the agreement because of ETE’s breach of covenants in the merger agreement, then ETE may be required to reimburse Williams’ fees and expenses up to $100 million.
Energy Transfer said Wednesday that it believes it has complied with all the terms of the merger agreement.
Both Williams and Energy Transfer have made recent statements that they endorse the merger. Williams shareholders still need to vote to approve the proposed deal.
Williams sues ETE and CEO Warren over share offering
http://finance.yahoo.com/news/williams-sues-energy-transfer-over-135754518.html
Reuters
17 hours ago
(Adds Energy Transfer response, shareholder quote, background)
By Michael Erman and Mike Stone
April 6 (Reuters) - Williams Companies Inc sued Energy Transfer Equity LP and its Chief Executive Kelcy Warren on Wednesday, claiming they violated the U.S. pipeline companies' merger agreement by making a private preferred share offering to ETE's top investors.
Williams argued that the offering in March, which prompted a public rift between the companies, was designed to siphon money to Warren and away from Williams and ETE shareholders.
"Warren devised the special offering as a means to shield his own personal financial interests in ETE - namely, the distributions he stands to receive from ETE on his ETE common units - from the economic uncertainty that has been facing ETE in recent months," Williams said in a lawsuit filed in a Texas district court.
Another Williams lawsuit filed against ETE on Wednesday, in the Delaware Court of Chancery, remains under seal.
Williams, based in Tulsa, Oklahoma, said in a statement it was committed to the nearly $14 billion deal and hoped to hold a stockholder vote to close it as soon as possible.
The offering at the center of the lawsuit effectively protects Warren and other top shareholders from a cut in distributions by ETE, a master limited partnership.
The offering to top investors, which ETE said would help it pay down debt from the merger, would provide convertible units in exchange for a temporary cut in distributions. These investors would eventually receive equity in exchange for the convertible units even if other ETE shareholders had their distributions reduced.
Energy Transfer said in a filing with the Securities and Exchange Commission that it would vigorously defend itself against the lawsuits. It said it believes that it has complied, and intends to comply, with its obligations under the merger agreement.
Dallas billionaire Warren is ETE's largest shareholder and controls the company through its general partner. He received more than $200 million in distributions from the company over the last year.
He set his sights on Williams last year in order to transform his empire into one of the biggest pipeline networks in the world but the timing was poor. A prolonged drop in oil and gas prices has made the deal more difficult to finance and to justify to shareholders.
ETE would need to take on a heavy debt load to fund the $6 billion cash portion of the deal. Williams said in the Texas lawsuit that ETE has looked into how it might be able to walk away from the merger even though the terms do not allow that.
ETE has also fired its chief financial officer and slashed projections for cost savings from the Williams tie-up, making investors highly skeptical about whether the deal would close.
"The news stream around this deal over the last several months has not been constructive," Quinn Kiley, managing director at Advisory Research Inc, which owned around 9 million ETE shares and 3.7 million Williams shares as of the end of 2015. "It's hurt holders on either side, and created a negative spin cycle."
Williams shareholders, who will receive mostly ETE stock for their shares if the deal is completed, have yet to vote on the deal.
ETE said in March it had originally intended to offer the preferred units to all of its shareholders, but Williams did not consent to a public offering. ETE said it did not ask Williams for its consent on the private offering.
Shareholders including Warren, who hold around 31.5 percent of Energy Transfer's units, participated in the offering and agreed to take smaller distributions for up to nine quarters.
Other shareholders participating in the offering include Energy Transfer's President Jon McReynolds and Chief Commercial Officer Marshall "Mackie" McCrea, according to SEC filings.
Shares of Williams rose 68 cents, or 4.6 percent, at $15.49, while ETE shares rose 49 cents, or 7.6 percent, to $6.94.
(Additional reporting by Tom Hals in Delaware and Amrutha Gayathri in Bengaluru; Editing by Meredith Mazzilli and Richard Chang)
Williams Accuses Its Would-Be Leader of Malicious Unit Offering
http://www.bloomberg.com/news/articles/2016-04-06/williams-accuses-would-be-owner-of-maliciously-breaching-deal?cmpid=yhoo.headline
by Jim Polson
Williams Cos. is accusing its would-be leader of “maliciously orchestrating” a unit offering that would guarantee him more than $200 million a year in payments at the expense of other investors.
The pipeline giant, which in September agreed to be taken over by Kelcy Warren’s Energy Transfer Equity LP, filed suit in Texas Wednesday accusing Warren of seeking to “enrich himself” with a private equity sale that went forward without Williams’ blessing. It’s the latest hiccup in a merger that has seen its value crater as the companies’ stocks have dropped by more than 60 percent. They’ve both said they’re still committed to closing the deal.
Collapsing oil prices are weighing on the value of both of the companies’ shares, casting doubt on whether Energy Transfer, the midstream giant founded by Warren, will actually follow through with its purchase of Williams. In its legal challenge, Williams argued that its stockholders, slated to receive shares of a new Energy Transfer affiliate as part of the deal, may be deprived of distributions because of the offering that Warren led last month.
Warren designed the offering “to guarantee himself at least $53 million every quarter,” potentially through May 2018, Williams said in its lawsuit. “By contrast, Williams’ stockholders, who will receive ETC common shares, will not be guaranteed any distributions and may well get none at all.”
‘Internal Pressures’
While challenging its buyer in court, Williams said in a statement Wednesday that it’s committed to mailing a proxy statement for the deal, holding a vote and closing the transaction as soon as possible.
For its part, Energy Transfer said the company has complied and plans to continue to comply with the terms of the merger agreement with Williams. The pipeline operator said in a statement that it’ll “vigorously defend against the claims made by Williams.”
The lawsuit “will create internal pressures at Energy Transfer Equity,” said Skip Aylesworth, who manages $1.5 billion in holdings at Hennessy Funds in Boston. “Kelcy will pound the table as soon as he’s been summoned for subpoena or something, to say, ‘Get me out of this thing.’”
Two Lawsuits
The lawsuit is one of two that Williams filed on Wednesday regarding last month’s private offering. In the second one filed in Delaware Court of Chancery, Williams said it’s seeking to unwind the transaction, arguing that it gives preferential treatment to “select investors.” That complaint is sealed.
The offering essentially created a two-class structure that would subordinate Williams shareholders if the merger went through, said Ethan Bellamy, a Denver-based analyst for Robert W. Baird & Co. who rates Energy Transfer neutral and doesn’t rate Williams. Warren took part in the offering “with respect to substantially all of his common units,” or about 18 percent of the company’s total outstanding common units, according to company filings.
Last month, Energy Transfer and Williams lowered the potential earnings boost from merging the two companies to $170 million a year, down from an estimated $2 billion six months earlier. Oil prices have plunged by almost $10 a barrel and natural gas is down 25 percent since they agreed to the deal.
Energy Transfer said in a filing last month that it had issued 329.3 million convertible units to holders as part of the private offering. The holders in turn agreed to forgo a portion of their potential cash distributions for as many as nine quarters. Energy Transfer had said it went ahead with the private offering after Williams blocked a public one that would’ve been available to all of its common unit holders.
Williams’ (NYSE: WMB) board of directors has approved a regular dividend of $0.64, or $2.56 annualized, on the company’s common stock, payable March 28, 2016 to holders of record at the close of business March 14, 2016.
The new amount is an increase of $0.06, or 10 percent, from the first-quarter 2015 dividend.
Williams has paid a common stock dividend every quarter since 1974.
I haven't checked ETE for news, I check WMB and often they differ a bit, but a few days ago Reuters thinks they might take it to a shareholder vote.
Personally, I never liked the deal anyway.
Energy Transfer likely to take Williams deal to shareholder vote-CNBC
11:57 AM ET, 02/26/2016 - Reuters
(Corrects headline and paragraph 1 to say Energy Transfer is likely to take the proposed buyout to a shareholder vote, not that it will take a shareholder vote on the proposed buyout)
Feb 26 (Reuters) - Pipeline giant Energy Transfer Equity Lp is likely to take its proposed buyout of Williams Companies Inc to a shareholder vote, CNBC reported, citing sources.
Energy Transfer in September agreed to buy Williams in a deal valued around $33 billion at that time.
Energy Transfer did not immediately reply to a call and email seeking comment. (Reporting by Anet Josline Pinto in Bengaluru; Editing by Savio D'Souza)
And this from newswire on the 26th of February as well
Market Chatter: Williams Companies Edges Up After Report Thursday Energy Transfer Wants Out of Merger Deal
10:55 AM ET, 02/26/2016 - MT Newswires
10:55 AM EST, 02/26/2016 (MT Newswires) -- Williams Companies (WMB) is up more than 1% after the NYT reported on Thursday Energy Transfer Equity (ETE) is trying to pull out of its deal to buy the company for about $38 billion.
In recent weeks, the company considered, but never presented, an offer of a one-time payment more than $2 billion to Williams to walk away, according to two individuals with knowledge of the discussions who spoke on condition of anonymity because of nondisclosure agreements, the story said.
At Williams, the deal reportedly was hated by many from the start.
The story notes that Energy Transfer would have to either sell assets or raise additional debt to pay for the deal, but neither option is attractive considering the ongoing slump in energy prices.
Williams' shareholders still need to vote on the deal and could reject the deal, the story says.
Energy Transfer shares were last up 2.5%.
Price: 16.25, Change: +0.22, Percent Change: +1.37
Very interesting. Changing dynamic I suppose?
NYT: Energy Transfer considers pulling out of Williams
http://finance.yahoo.com/video/nyt-energy-transfer-considers-pulling-195300146.html
Could this be the sale of the company that they halted the stock????? I'll take $30
Williams, Williams Partners Provide Conference Call Information for Year-End 2015 Financial Results
TULSA, Okla.--(BUSINESS WIRE)--Williams (NYSE: WMB) and Williams Partners L.P. (NYSE: WPZ) plan to announce their year-end 2015 financial results after the market closes on Wednesday, Feb. 17, 2016.
The company and the partnership will jointly host a conference call and live webcast on Thursday, Feb. 18, at 9:30 a.m. EST. A limited number of phone lines will be available at (800) 524-8850. International callers should dial (416) 204-9702. A link to the webcast, as well as replays of the webcast in both streaming and downloadable podcast formats, will be available following the event at www.williams.com.
- See more at: http://www.publicnow.com/view/4210A1A01AC1F2DF621CD09A4E9F41A0AA4B6E67#sthash.kBOZwgxP.dpuf
$WMB 35% gainer yesterday, how much of that will be given back today?
This is a long term hold.
Williams (NYSE: WMB) board of directors has approved a regular dividend of $0.64, or $2.56 annualized, on the company’s common stock, payable Dec. 28, 2015 to holders of record at the close of business Dec. 11, 2015.
Agree could have been better but from here very attractive.
True.
It's certainly not the end result I was hoping for but you're right, it does make for a strong player.
The sector has had such a pull back that now owning more shares in an up cycle benefits one in PPS growth. Dividend? Having more shares changes that as well. More dividend income if they keep it around the same.
and 'the combination will make for a very strong player as commodity markets'
It could be a good thing longterm.
I think the combination will make for a very strong player as commodity markets upcycle.
Yep. Sure was. LOL
I hope I like the new company, now that I am a proud owner of a good trade gone bad. ;)
Haha serious fail!
WMB 3Q earnings 10-28-15 AMC
Williams, Williams Partners to Report Third-Quarter Financial
Williams (NYSE: WMB) and Williams Partners L.P. (NYSE: WPZ) plan to announce their third-quarter 2015 financial results after the market closes on Wednesday, Oct. 28.
The company and the partnership will host a joint Q&A live webcast on Thursday, Oct. 29, at 9:00 a.m. EDT. A limited number of phone lines will be available at (800) 505-9568. International callers should dial (416) 204-9271. A link to the webcast, as well as replays of the webcast in both streaming and downloadable podcast formats, will be available for two weeks following the event at www.williams.com.
Oh I have a question...
Why turn down such a large bid for the company and then take a smaller one? ;) (AR AR!)
Procrastination never works, Darn it!!!! ;)
Energy Transfer (ETE, ETP) and Williams Cos. (WMB, WPZ) are planning to sell WMB’s stake in one of Florida’s main interstate pipelines to win regulatory approval for $37B merger, Bloomberg reported earlier.
The companies anticipate that a sale of WMB’s 50% stake in the Gulfstream Natural Gas System will be required by the FTC, and WMB may explore selling its stake to Spectra Energy Partners (NYSE:SEP), according to the report.
Energy Transfer–Williams Merger: Must-Know Overview
A Complete Guide to the Energy Transfer–Williams Merger
http://marketrealist.com/2015/10/energy-transfer-williams-merger-must-know-overview/
Seven parts
I thought he had a pretty sober take,
of course I'm partial to anyone in the same boat as me wanting to come away with a profit.
New Energy Transfer Family Would Include 6 Companies
By Amey Stone
Investors in Energy Transfer Equity (ETE) weren’t happy when the company announced Monday it is buying The Williams Companies (WMB). Williams investors were disappointed at the purchase price, but Energy Transfer shareholders were also unhappy with the complex transaction and sold off their shares.
A new report from independent corporate bond research firm Gimme Credit, points to why investors may be troubled — the Energy Transfer family is getting really huge and complex.
If approved by shareholders, ETE, a master limited partnership, will form a new partnership, Energy Transfer Corp. (ETC), which will be treated as a C-corp and merge with Williams, explains Gimme Credit analyst Philip Adams. Williams shareholders can choose to receive cash or stock in ETC.
At closing next year, ETE and ETC would be “holdcos” for four publicly-traded MLPs. Adams writes in a Wednesday note:
ETE and ETC as “holdcos’, receiving cash from four MLPs — WPZ, ETP, SXL, and SUN. ETE is committed to the multi-entity structure despite the concern that ETE entities (combined) are trading at a discount to a simplified KMI. With future dropdowns, intra-family horse trading, an LNG project and future M&A, one wonders if the two-tiered, multi-MLP strategy will be ETE’s final structure.
The Energy Transfer complex would be the largest U.S. energy infrastructure company in the U.S. with an enterprise value of $149 billion, $41 billion more than Kinder Morgan (KMI), calculates Adams. It would be the No. 5 energy company in the world by that measure.
Despite the complexities, investors seemed to be getting comfortable with the Williams-Energy Transfer merger on Wednesday. Aided by an up market, Williams was up 5.5% to $37 and ETE was up 11% to $21 after two days of sharp declines.
I hadn't read that one. Seems like a good blog to keep up on.
"Energy Transfer will now become the General Partner for $WPZ"
I hadn't really thought about that seeing they seemed so uninterested in WPZ.
Of course that is how that worked.
Thank you, William! :)
WB? Lol, ok, well EU,
I don't think anyone could be blamed for expecting more when the company rejected that first offer. What did they think they had that was better?
The sector continues down, big surprise, and they picked that moment to suddenly panic? Really? There must be more.
Couldn't some peed off holders, Loeb, Perry,Meister et al get them to undo the deal? Is it too late for another bidder to step in with value now so low?
Still some cheer in the deal as it stands (sorry, best I can offer :)).
http://activiststocks.com/blog/williams-companies-buyout?utm_content=buffere2052&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer
First appeared here: A Brutal End For Merger Arb Investors in Williams Companies. What Does the Deal Mean for Williams Partners? by Jason Knapp.
Merger Arb is a very popular type of special situation play in volatile markets like the one that we are currently experiencing. OK, volatile is putting it a little kindly, bear market is perhaps a more appropriate description of what's going on today. For those who are not familiar with the strategy, merger arb involves purchasing shares of companies that have been bought out or are in the process of negotiating a deal to be bought out with the hopes if capturing the spread between the price being paid for the company and the level that it is trading at. This investment works well most of the time, but when it goes wrong it can be very painful for investors. As you can see by the following chart, it definitely has gone wrong for investors who purchased shares of Williams Companies.
The twists and turns of the Williams Companies story resemble those of a soap opera. Earlier this year, in a move reminiscent of the recent consolidation in the Kinder Morgan family of pipeline companies, Williams decided that it would buy out its limited partnership Williams Partners. Many investors piled into Williams Partners hoping to capture the spread between the buyout offer and the level that the stock was trading at.
However, not long after the Williams consolidation deal was announced, Energy Transfer Equity made an unsolicited bid for Williams Companies. At first Williams Companies rebuffed $ETE's advances and sought other suitors. For a brief period of time Spectra Energy considered making a bid for $WMB, but it ultimately decided that it was too small to swallow such a large fish. This morning, with no other suitors and Mr. Market brutally punishing all energy-related stocks Williams Companies decided to accept Energy Transfer's merger proposal.
So if Williams Companies decided to accept a takeover offer, why was its stock hammered so badly? The problem with Energy Transfer's buyout offer is that as a highly leveraged company $ETE had to pay for the majority of the buyout with its own battered stock. As $ETE's stock dropped in the recent market selloff, so did the value of its takeover offer and in turn Williams Companies stock. Williams Companies is off 8% and Energy Transfer is down 9.5%.
Where does this deal leave Williams Partners? To use a soap opera reference, alone at the altar and down 5% itself.
One silver lining for Williams Partners and its shareholders is at least it will receive a $428 million breakup fee for its troubles. That's nothing to sneeze at. Nothing else should change for the company, other than the elimination of the buyout premium that previously existed. Energy Transfer will now become the General Partner for $WPZ and it will continue to pay out its generous 9.5% distribution to shareholders.
Having said that, investors would be wise to keep an eye on this distribution. While it has been improving, $WPZ's coverage ratio still sat at only 0.97x last quarter. Anything below 1 means that the company is not earning enough distributable cash to pay its distribution. I expect that the coverage ratio will improve in Q3 as Williams' Partners' new Geismar Ethylene comes fully on-line and begins to generate cash for the company:
The future is a little murky for Williams Partners at the moment. After it receives the buyout proposal from Williams Companies, it scrapped its previous guidance. Questions also remain about future dropdowns from its new parent company and whether the general weakness in the energy sector will have a negative impact upon Williams Partners. I personally own shares of $WPZ and believe that the selloff has been significantly overdone. I plan to continue to hold my shares and collect its generous quarterly payout. Ultimately, I believe that the energy sector will recover, interest rates will not rise nearly as much as many fear and shares of ravaged MLPs like Williams Partners will bounce back like a coiled spring
A vote most definitely but can't speak to management or control blocks at this time.
The other one?
Would that be Miss or Maam, WB?
Maam sounds terribly old. Miss sounds terribly young.
"Thanks, Stupid" would have worked. ;)
I can't believe I fell for the ol' "lets turn down a $64.50 per share deal for a $43.50 deal" trick.
I'm in at 49 sump'n and on 2 sets. That sucks. LOL
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