Replies to post #36 on Williams Cos. Inc. (WMB)

[eastunder]

Is Williams' Price Worth It for Energy Transfer?

By Investopedia | June 24, 2015

http://www.investopedia.com/stock-analysis/062415/williams-price-worth-it-energy-transfer-ete-wmb.aspx?partner=YahooSA

Earlier this week, Energy Transfer Equity (NYSE: ETE) made an unsolicited offer to buy out Williams Cos. (NYSE: WMB) for $48 billion, or about $64 per share for the pipeline company's existing shares. If you look at Williams' current financials, this is an extremely generous offer. Yet Williams' management said it actually undervalues the company. Is the company really worth more than this generous premium? And why is Energy Transfer willing to pay such a high premium for Williams' assets in the first place? Let's look at what Energy Transfer was thinking by offering so much for Williams, and whether it's worth upping the bid now that its target has rebuffed the offer.

Any which way but cheap
The $64-a-share proposal to Williams was a pretty significant premium to what the company was getting on the open market. Last week, prior to the announcement, Williams shares were trading at less than $49, so the Energy Transfer offer was close to a 33% premium on Williams' market value. When you look at it from a valuation standpoint, though, it looks like Energy Transfer was prepared to pay a king's ransom to get Williams compared to the valuations of similar master limited partnerships in the space. The table below is a comparison of Williams' valuation at Energy Transfer's offer price versus the current valuation of similar midstream companies

Company                    TEV/EBITDA       Price/Book Value 
 Williams Companies              28.2x             5.82x  
 Energy Transfer Equity          18.1x             49.5x  
 Energy Transfer Partners        14.2x              1.4x  
 Spectra Energy                  13.6x              2.9x  
 Enterprise Products Partners    16.3x              3.1x  
 Plains All American Pipeline    10.9x              2.1x  
 ONEOK Partners                  12.4x              1.7x 

Source: S&P Capital IQ.

That purchase price does seem a bit outlandish, but keep in mind that purchasing all of Williams Cos. also means retaining the incentive distribution rights to Williams Partners. If Williams were to accept the deal from Energy Transfer, it would require the termination of Williams' deal to purchase the remaining outstanding units of its partnership.

Paying for the future?
The other thing to consider is that Energy Transfer would be buying Williams' current earnings power and its book value, but also gaining access to one of the largest project portfolios in the midstream space today. Williams' $30 billion in potential growth projects is close in size to that of midstream giant Kinder Morgan, yet Williams is about half the size of Kinder Morgan.

[eastunder]

What Happens to Williams Partners Now?

By Paul Ausick June 23, 2015 8:05 am EDT

http://247wallst.com/energy-business/2015/06/23/what-happens-to-williams-partners-now/

One part of the rejected $53 billion offer for Williams Companies Inc. (NYSE: WMB) from natural gas pipeline MLP Energy Transfer Equity L.P. (NYSE: ETE) that may turn out worse for investors than the rejection itself is the fate of Williams Partners L.P. (NYSE: WPZ), the MLP that Williams controls and has offered to buy completely for about $13.8 billion in parent company stock.

Energy Transfer’s offer explicitly required the termination of Williams’s (WMB) bid to acquire its midstream partner, and shares of Williams Partners (WPZ) have dropped more than 6% in Monday trading. It is difficult to see how any bid for WMB will permit the deal for WPZ to go through.

The WMB offer for WPZ adds about $11 billion in long-term debt to any deal, and if WMB wants to remain independent all it has to do is complete the deal for Williams Partners. No buyer will surface for quite some time.

So what else could happen to Williams Partners? The obvious answer is that it gets picked up by another MLP. The question remains, “At what price?” Very likely not the $57 or so per share price implied in the offer from WMB. The only buyers left for WPZ will be midstream MLPs looking to expand.

Remember, too, that pipeline MLPs must grow or die. One report indicated that WMB might be trying to tease out a bid for WPZ out of Kinder Morgan Inc. (NYSE: KMI) or some other huge pipeline company. Among WPZ’s assets is the 10,500-mile Transco pipeline system that hauls natural gas from the Gulf Coast region to Northeastern and Southeastern states. WPZ also has pipeline and gathering assets in the Eagle Ford and Marcellus shale plays, among others. These are valuable assets and WMB may not be able to get maximum value for WPZ if other potential acquirers take the same position as Energy Transfer.

That is probably why WPZ stock dropped 7.6% on Monday to close at $49.10, in a 52-week range of $44.87 to $62.95. The consensus price target on the stock is $55.

WMB stock closed up nearly 26% on Monday at $60.86, after posting a new 52-week high of $61.38. The 52-week low is $40.07.

Energy Transfer started out with a gain on Monday, but shares closed the day down nearly 5% at $65.06, in a 52-week range of $45.88 to $70.88.

By Paul Ausick


http://247wallst.com/energy-business/2015/06/23/what-happens-to-williams-partners-now/