Pipeline giant Williams Cos. agreed to acquire Williams Partners L.P. in an all-equity transaction that values the latter at about $33 billion.
“This transaction simplifies our corporate structure, streamlines governance and positions Williams for strong investment-grade credit ratings,” Williams Chief Executive Alan Armstrong said. He added that the deal would result in lower capital costs and “improved tax benefits.”
Under the deal, Williams WMB, +5.39% will swap 1.115 shares for each unit of Williams Partners WPZ, +22.28% , of which Williams Cos. already owns 58%. In the aggregate, Williams will issue 275.4 million shares, which is about 27% of the total shares of the combined company.
Based on Williams Cos. closing price Tuesday, the deal values Williams Partners at $55.86, or an 18% premium to where Williams Partners finished Tuesday.
Shares of Williams Partners jumped 23% to $58.50 in premarket trading, while shares of Williams Cos. increased 7.3% to $53.74. The Oklahoma-based Williams also raised its third-quarter dividend.
Williams in February completed the merger of two master-limited partnerships it controls--William Partners and Access Midstream Partners--into one giant natural-gas pipeline system under the Williams Partners name. Williams Partners, a major pipeline company based in Tulsa, Okla., has sought to increase its presence in shale formations where drillers are using new technologies to produce more oil and natural gas.
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