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.
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